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Author: 

U.S.  Federal  Trade 
Commission 

Title: 

Report  of  tine  Federal 
Trade  Commission  on 

Place: 

Washington,  D.C. 

Date: 

1920 


MASTER    NEGATIVE   # 


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U«S«   Federal  trade  commission* 

Report  of  the  Federal  trade  coiamission  on  coift" 
meroial  wheat  flour  milling*  September  15,  1920. 
Washingtont  Govt*  print*  off*,  1920* 

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REPORT 


OF  THE 


FEDERAL  TRADE  COMMISSION 


ON 


COMMERCIAL  WHEAT  FLOUR 

MILLING 


September  15, 1920 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1920 


'.4»i«-**» 


LIBRARY 


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REPORT 


OF  THE 


FEDERAL  TRADE  COMMISSION 

ON 

COMMERCIAL  WHEAT  FLOUR 

MILLING 


September  15,  1920 


WASHINGTON 
GOVERNMENT  PRINTING  OFFICE 


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FEDERAL  TRADE  COMMISSION. 


/.    Yi&FORiTjILtJiiDOCK'  Chair  man. 


\  HuBTON  Thompson 


' ,'      Jf  E3L8bN   B.   (r^StOLL*  * "  *    '  '* 

John  Garland  Pollard.. 

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additional  copies 

or  THIS  PUBUCATION  MAT  BE  PKOCUBED  PBOM 

THE  SUPERINTENDENT  OF  DOCUMENTS 

OOYXBNMENT  PBINTINO  OmCK 

WASmNQTON,  D.  C. 

AT 

10  CENTS  PER  COPT 


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CONTENTS. 


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Pag«. 

Letter  of  transmittal 7 

Chapter  I. — General  Survey. 

Sec.  1.  Origin  and  scope  of  the  report H 

Sec.  2.  Commercial  importance  of  wheat  flour 11 

Sec.  3.  Production  and  consumption  of  wheat  flour  in  the  United  States 12 

Production 12 

Consumption M 

Sec.  4.  Flour  mills  and  flour  milling  in  the  United  States. 15 

Development  of  the  flour  and  grist  mill  industry 15 

Neighborhood  mills 15 

Commercial  mills 16 

Localization  of  commercial  milling 17 

Northwestern  Selling  Area • 19 

Southwestern  Selling  Area 21 

Pacific  Selling  Area 22 

Eastern  Buying  Area 24 

Southern  Buying  Area 25 

Central  Neutral  Area 26 

Southeastern  Neutral  Area 28 

Western  Neutral  Areas 29 

Small  Production  Areas 29 

Wheat  crop,  flour  production,  and  population  of  the  United 

States,  and  of  certain  areas  compared 29 

Concentration  in  the  milling  industry '. 33 

Concentration  and  competition 38 

Competitive  methods 39 

Sec.  5.  Millers'  Associations 39 

Millers'  National  Federation 40 

Community  Millers*  Association  of  America 40 

The  Millers'  Export  Association  (Inc.) 41 

Other  associations 41 

Chapter  II. — Costs,  Prices,  and  Profits. 

Sec.  1.  Prices  of  wheat  flour 42 

Sec.  2.  Cost  of  selling  flour 50 

Mill  sales 60 

The  flour  trade 51 

Grocers'  flour  trade 51 

Car-lot  flour  jobbing 51 

Less-than-car-lot  jobbing 52 

Sec.  3.  Flour-mill  accounts 54 

Sec.  4.  Scope  of  inquiry  into  costs  and  profits 56 

Sec.  5.  The  mills  covered 57 

Territorial  location  and  kind  of  wheat  used 57 

Consumption  of  wheat  and  output  of  flour 59 

8 


CONTENTS. 


S«c.    6.  Inveetment,  earnings,  and  distribution  of  earnings 62 

Sec.    7.  Rate  of  return  on  investment 72 

Sec.    8.  Sales  and  profit  on  sales 76 

Sec.    9.  Average  investment,  receipts,  cost  plus  interest,  and  profit  per  barrel 

of  flour •. 78 

Average  per  barrel  figures  for  the  37  companies 78 

Comparison  of  increases  in  the  investment  per  barrel  of  the  37 

companies  and  of  the  different  groups 82 

Comparison  of  advances  in  prices,  or  receipts  per  barrel,  of  the  37 

companies  and  of  the  different  groups 84 

Comparison  of  cost  plus  interest  per  barrel  of  the  37  companies  and 

of  the  different  groups 86 

Comparison  of  profit  per  barrel  of  the  37  companies  and  of  the 

different  groups 87 

Sec.  10.  Costs  in  wheat-flour  milling 90 

Analysis  of  per  barrel  cost 90 

Cost  of  wheat 91 

Demand  and  supply  factors  affecting  the  miller's   cost  of 

wheat 91 

Wheat  used  per  barrel  of  flour 97 

Cost  of  wheat  per  bushel 98 

Cost  of  wheat  per  barrel  of  flour 99 

Cost  of  packages 100 

Operating  costs,  including  repairs  and  depreciation 100 

General  and  selling  expenses  per  barrel  of  floiur 101 

Operating,  selling,  and  general  expenses 102 

Sec.  11.  Relative  eflSciency  of  flour-milling  companies 103 

Sec.  12.  Wheat-flour  milling  in  Washington  and  Or^on 105 


LIST  OF  TABLES. 


5f 


( 


Table  1. 

2. 

3. 

4. 

6. 

6. 

7. 

8. 

9. 
10. 
11. 
12. 

13. 
14. 

15. 

16. 
17. 
18. 


/• 


19. 

20. 
21. 


Page. 
Production  of  wheat  flour  in  the  United  States,  as  reported  by  the 

census,  1889,1899,  1909,  and  1914 18 

Per  capita  consumption  of  flour  in  the  United  States,  by  fiscal  years, 

1901-2  to  1917-18 14 

Development  of  merchant  milling  in  the  United  States,  as  reported  by 

the  census,  1899, 1904, 1909,  and  1914 15 

Number  and  production  of  commerical  mills,  by  States,  as  reported 

by  the  census,  1909  and  1914 16 

Wheat  crop,  flour  production,  and  population  in  the  Northwestern 

Selling  Area,  1899,  1904, 1909,  1914,  and  1919 21 

Wheat  crop,  flour  production,  and  population  in  the  Southwestern 

Selling  Area,  1899,  1904,  1909, 1914,  and  1919 22 

Wheat  crop,  flour  production,  and  population  in  the  Pacific  Selling 

Area,  1899, 1904,  1909, 1914,  and  1919 23 

Wheat  crop,  flour  production,  and  population  in  the  Eastern  Buying 

Area,  1899,1904,  1909,  1914,  and  1919 24 

Wheat  crop,  flour  production,  and  population  in  the  Southern  Buying 

Area,  1899, 1904, 1909, 1914,  and  1919 26 

Wheat  crop,  flour  production,  and  population  in  the  Central  Neutral 

Area,  1899,  1904,1909,  1914,  and  1919 27 

Wheat  crop,  flour  production,  and  population  in  the  Southeastern 

Neutral  Area,  1899,  1904,  1909,  1914,  and  1919 28 

Wheat  crop,  flour  production,  and  population  of  the  United  States 

in  1899  and  1919,  together  with  the  different  percentages  of  those 

totals  found  in  the  more  important  areas  shown  on  Map  II 30 

Classification  of  commercial  flour  mills  according  to  output  and 

location,  1904, 1909 ,  and  1914 34 

Retail,  exjwrt,  and  wholesale  prices  of  wheat  flour,  millers*  receipts 

for  flour  and  feed,  millers'  cost  of  wheat,  and  farmers'  receipts  for 

wheat,  per  unit  figures,  1913-14  to  1917-18 43 

Average  receipts,  costs,  gross  mai^n,  expense,  and  profit  on  certain 

New  York  jobbers'  sales  of  wheat  flour  in  less  than  carload  lots, 

by  years,  1914  to  1918 53 

Wheat  consumption,  flour  and  feed  production,  and  flour  and  feed 

sales  of  the  37  selected  companies,  mill  years  1913-14  to  1917-18. .  59 
Deductions  from  and  additions  to  the  investment  as  shown  in  the 

original  company  accounts 62 

Revised  investment  in  the  milling  business  at  the  banning  and  end 

of  each  year,  together  with  adjustments  because  of  transactions  not 

pertaining  to  the  milling  business,  and  additions  through  the  mill 

earnings  of  the  year,  less  distributions,  by  years,  1913-14  to  1917-18 .  65 
Comparison  of  the  results  of  mill  operation  and  of  investment  items 

as  shown  in  the  original  accounts  and  in  the  Commission's  revised 

statements 69 

Investment  and  rate  of  return  on  investment,  by  groups,  and  by 

years,  1913-14  to  1917-18 72 

Sales  and  per  cent  of  profit  on  sales,  by  groups,  and  by  years,  1913-14 

to  1917-18 76 


6 


LIST  OF  TABLES. 

22.  Average  investment,  receipts,  cost  plus  interest,  and  profit  per  barrel 

of  flour  sold  of  the  37  companies,  by  years,  1913-14  to  1917-18 78 

23.  Comparison  of  increases  in  the  investment  per  barrel  of  the  37  com- 

panies and  of  the  different  groups,  by  years,  1913-14  to  1917-18. . .        82 

24.  Comparison  of  advances  in  prices,  or  receipts  per  barrel,  of  the  37 

companies  and  of  the  different  groups,  by  years,  1913-14  to  1917-18 .        84 

25.  Comparison  of  cost  plus  interest  per  barrel  of  the  37  companies  and  of 

the  different  groups,  by  years,  1913-14  to  1917-18 86 

26.  Comparison  of  profit  per  barrel  of  the  37  companies  and  of  the  differ- 

ent groups,  by  years,  1913-14  to  1917-18 87 

27.  Analysis  of  the  costs  of  the  37  companies  in  making  and  selling  a 

barrel  of  wheat  flour,  by  years,  1913-14  to  1917-18 90 

28.  The  wheat  crop  of  the  United  States  and  quantities  exported,  con- 

sumed, and  left  in  stock,  by  years,  1913-14  to  1917-18  (in  millions 

of  bushels) 92 

29.  Analysis  of  the  consumption  of  wheat  in  the  United  States,  by  years, 

1913-14  to  1917-18  (in  millions  of  bushels) 95 

30.  Wheat  costs  of  the  37  companies,  by  years,  1913-14  to  1917-18 97 

31.  Cost  of  packages  per  barrel  of  flour  of  the  37  companies  by  groups  and 

by  years,  1913-14  to  1917-18 100 

32.  Operating  costs  per  barrel  of  flour,  including  repairs  and  depreciation, 

of  the  37  companies,  by  groups  and  by  years,  1913-14  to  1917-18.       100 

33.  General  and  selling  expenses  per  barrel  of  flour  of  the  37  companies, 

by  groups  and  by  years,  1913-14  to  1917-18 101 

34.  Total  operating,  selling,  and  general  expenses  per  barrel  of  flour  of 

the  37  companies,  by  groups  and  by  years,  1913-14  to  1917-18 102 

35.  Average  investment,  earnings,  and  rate  of  profit,  together  with  costs, 

profits,  and  investments  per  barrel  of  38  wheat-flour  milling  com- 
panies grouped  according  to  volume  of  sales,  five-year  period, 
1913-14  to  1917-18 104 


LIST  OF  EXHIBITS. 


Page. 
Exhibit  1 .  Tonnage  of  flour — Railroads  of  United  States 107 

II.  Estimated  percentages  of  soft  and  hard  winter,  soft  aiiJ  hard  com- 
mon spring,  and  durum  wheat  grown  in  the  36  leading  wheat- 
producing  States  in  the  United  States,  crop  of  1918 108 

III.  Progress  of  population,  wheat  crop,  and  flour  production  for  different 

sections  indicated  by  percentage  relations  to  totals  for  the  United 
States : log 

IV.  Millers'  associations  and  millers'  clubs no 

V.  Proportion  of  hard  and  soft  wheat  used  by  certain  mills  in  different 

localities,  crop  year  1916-17 uq 

VI.  Quality  and  weight  of  wheat  by  States,  crop  years  1912  to  1918.  117 
VII.  Analyses  of  the  cost  of  making  and  selling  a  barrel  of  wheat  flour, 

by  groups  and  by  years,  1913-14  to  1917-18 118 

MAPS. 

Map  I.  Map  of  the  United  States  showing  the  wheat  flour  zone  set  off  from  areas 

of  small  wheat  flour  output 17 

II.  Wheat  flour  production  and  distribution  areas facing . .        20 


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LETTER  OF  TRANSMITTAL. 


Federal  Trade  Commission, 
Washingtorij  September  15 j  1920. 
To  THE  Congress  of  the  United  States  : 

There  is  submitted  herewith  a  report  of  the  Federal  Trade  Com- 
mission on  commercial  wheat-flour  milling.  This  inquiry  had  its 
origin  in  connection  with  the  general  food  investigation  made  by  the 
Commission,  but  was  later  continued  as  a  separate  inquiry. 

The  wheat-flour  milling  industry  has  long  been  one  of  the  most 
important  in  the  United  States.  The  value  of  its  flour  output  alone, 
in  the  eight  months  ending  with  March,  1920,  considerably  exceeded 
a  billion  dollars.  The  growth  of  the  industry  has  been  relatively 
slow,  however,  for  many  years.  In  1899  the  mills  produced  a  little 
over  100,000,000  barrels  of  flour;  in  1919  about  120,000,000  barrels. 
While  the  wheat-flour  output  increased  less  than  20  per  cent,  popu- 
lation grew  at  twice  that  rate,  cotton  used  by  the  cotton  mills  of  the 
country  more  than  doubled,  and  there  was  a  threefold  increase  in 
the  production  of  pig  iron. 

Although  there  are  still  thousands  of  small  neighborhood  mills  in 
the  United  States,  and  although  the  largest  milling  concern  in  the 
country  has  never  produced  much,  if  any,  over  10  per  cent  of  the 
total  output,  the  tendency  toward  concentration  in  the  wheat-flour 
industry  is  notable.  The  crowding  of  consumers  into  limited  areas 
incidental  to  the  great  industrial  development  of  the  country  has 
created  a  situation  in  which  a  demand  for  standardized  brands  of 
wheat  flour  has  been  developed.  Such  flour  can  be  produced  suc- 
cessfully only  by  milling  concerns  of  large  size  whose  wheat  supply 
enables  them  to  maintain  the  quality  of  their  flour  practically  im- 
changed  from  year  to  year.  Concentration  has  been  further  advanced 
by  the  increased  production  of  hard  wheat  on  the  high  plains  west 
of  the  Mississippi  River.  The  flour  made  from  this  wheat  by  the 
western  mills  satisfies  the  demands  of  consumers  in  the  great  indus- 
trial centers  much  more  fully  than  does  the  flom*  produced  from  the 
soft  wheat  grown  in  other  sections  of  the  country.  The  low  price  of 
wheat  produced  in  the  Pacific  Northwest  has  also  developed  a 
surplus  output  of  wheat  flour  in  that  section,  which  finds  its  market 
principally  in  California  and  abroad. 

This  concentration  in  the  wheat-flour  industry  has  already  pro- 
greased  so  far  that  10  of  the  larger  milling  concerns  probably  have 


^        ♦ 


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(X>UM£BOIAIj  WHBAT-FIiOtTB  MILLIKQ. 


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I£TTER  OF  TRANSMITTAIi. 


9 


sufficient  capacity  to  produce  over  half  of  the  wheat  flour  used  in  the 
United  States.  Its  rate  of  progress  in  recent  years  is  indicated  by 
the  fact  that  in  the  10  years  from  1904  to  1914,  according  to  census 
statistics,  one  out  of  every  three  mills  having  an  annual  output  of 
6,000  to  20,000  barrels  went  out  of  business,  their  number  decreasing 
from  2,123  to  1,377.  On  the  other  hand,  the  nimiber  of  mills  making 
over  100,000  barrels  increased  from  166  to  218,  their  output  in  1914 
amounting  to  over  60  per  cent  of  the  total  for  the  entire  country. 

During  the  20  years  ending  with  1914  the  price  of  wheat  flour  did 
not  advance  nearly  so  much  as  the  average  price  of  other  commodities. 
According  to  census  statistics,  the  average  value  of  wheat  flour  at 
the  mills  m  1889  was  $4.33;  m  1899,  $3.35;  and  1909,  $5.20;  but  in 
1914  it  had  dropped  back  to  $4.67.  In  the  five  years  from  1913-14 
to  1917-18,  the  average  price  of  flour  sold  by  the  companies 
covered  in  the  present  report  increased  from  $4.15  to  $10.22  per 
barrel — an  advance  of  146  per  cent.  During  the  same  period, 
according  to  estimates  of  the  Department  of  Agriculture,  the  average 
price  received  by  farmers  for  wheat  advanced  160  per  cent,  while  price 
data  of  the  Department  of  Labor  indicate  an  increase  of  only  118 
per  cent  in  retail  prices  of  flour.  It  should  be  noted  also  that  for 
the  same  companies  the  millers'  combined  receipts  for  flom*  and  feed 
increased  only  134  per  cent.  The  wholesale  price  of  flour  has  con- 
tinued to  increase,  and  by  the  end  of  1919  its  advance  over  the  low 
level  of  the  nineties  was  relatively  greater  than  the  average  advance 
for  all  other  commodities.  Furthermore,  the  retail  price  of  flour 
advanced  during  1919  at  practically  three  times  the  average  rate  for 
other  foods. 

Incomplete  data  gathered  by  the  Commission  indicate  that  up  to 
1918,  profits  of  flour  jobbers,  including  proprietors'  salaries,  ranged 
from  10  cents  to  20  cents  per  barrel,  but  that  many  jobbers  probably 
made  twice  their  ordinary  profit  in  1917.  The  average  expense  in 
jobbing  a  barrel  of  flom*  apparently  increased  from  about  25  cents 
before  the  war  to  about  40  cents  in  1917  and  1918. 

The  circumstances  under  which  this  inquiry  into  the  wheat-floiu" 
industry  was  carried  on  made  it  advisable  to  limit  the  report  largely 
to  the  operations  of  37  companies  whose  annual  sales  in  1913-14 
amounted  to  38,450,000  barrels,  in  1915-16  to  43,430,000,  and  in 
1917-18  to  34,659,000.  Their  sales,  however,  are  so  widespread  and 
are  such  a  large  factor  in  the  interstate  flour  trade  that  their  prices 
may  be  taken  as  representative  of  commercial  milling  operations 
throughout  the  United  States.  Ten  of  these  concerns  included  in  what 
is  referred  to  hereafter  as  the  Northwestern  group  used  hard  spring 
wheat  almost  exclusively;  13  in  the  Southwestern  group  used  hard 
winter  wheat  for  85  per  cent  of  their  output,  and  14  in  the  Eastern 


f 


i 


r 


group  divided  their  consumption  quite  equally  between  hard  and 
soft  wheat. 

The  accounting  records,  eyen  of  the  37  selected  companies,  were 
not  found  to  be  wholly  satisfactory  for  use  in  determining  past 
developments  or  present  conditions  in  the  industry.  After  careful 
revision  it  was  possible,  however,  to  obtain  figures  for  the  37  com- 
panies and  for  the  different  groups  referred  to  above  which  can  be 
used  with  confidence  in  comparing  different  years  and  different 
groups  of  companies. 

On  flour  sales  amounting  to  $159,656,875  the  37  companies  made  a 
profit  of  $5,612,163  in  1913-14,  and  in  1917-18  on  sales  amounting 
to  $354,192,287  their  profit  was  $22,440,858.*  The  rate  of  profit  on 
sales  increased  from  3.4  per  cent  in  1913-14  to  6.5  per  cent  in  1916-17 
and  dropped  back  to  5.3  per  cent  in  1917-18.  The  decrease  in  the 
last  year  was  due  in  part  to  sales  to  the  Government  at  less  than  cost. 

This  remarkable  development  of  the  business  of  the  37  companies 
resulted  in  an  increase  in  their  investment  from  $43,460,780  at  the 
beginning  of  the  five  years  to  $69,528,605  at  its  end.  These  concerns 
not  only  made  this  increase  of  60  per  cent  in  their  investment  but 
also  paid  out  $36,716,403  in  dividends  and  Federal  taxes  and  for 
outside  investments. 

The  average  annual  earnings  of  the  Northwestern  group  on  its 
average  investment  for  the  five  years  were  24.4  per  cent;  those  of  the 
Southwestern,  23.5  per  cent;  but  those  of  the  Eastern  group  amounted 
to  only  15.8  per  cent.  The  profit  of  the  37  companies  was  over  twice 
as  large  in  the  last  two  years  as  in  the  first  three.  In  1916-17  their 
return  on  investment,  38.4  per  cent,  was  over  three  times  as  large  as 
in  1913-14.  In  the  single  year  191&-17  the  profit  of  the  Northwestern 
group  amounted  to  44.7  per  cent  and  in  1917-18  that  of  the  South- 
western group  was  42.6  per  cent.  In  striking  contrast  with  these 
figures,  the  earnings  of  the  Eastern  group  in  1915-16  were  only  6.5 
per  cent.  In  1917-18,  however,  the  profit  of  that  group  had  increased 
to  30.8  per  cent. 

Segregating  wheat-flour  costs  from  costs  of  other  products  as 
accurately  as  possible,  and  allowing  'a  credit  from  feed  sales  of  76 
cents  in  the  first  year  and  $1.29  in  the  last,  the  cost  per  barrel  of 
flour  for  the  37  companies  increased  from  $3.99  in  1913-14  to  $9.G8 
in  1917-18.  In  the  first  year  mentioned  this  cost  included  $3.96  for 
wheat  and  79  cents  for  all  other  items  and  the  last  year  $9.72  for 
wheat  and  $1.25  for  other  items.  The  increase  in  cost  ot  wheat 
was  $5.76  and  that  in  the  cost  of  all  other  items  46  cents.  The 
cost  of  wheat  advanced  146  per  cent  during  this  period,  packages 
74  per  cent,  mill  operating  costs  68  per  cent,  and  general  and  seilhig 

♦After  this  report  went  to  press  the  Commission  learned  that  $1,297,384.05  ot  this  S22,440,858  was 
paid  to  the  Grain  Corporation  as  excess  profits. 


10 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


expenses  37  per  cent.  This  great  increase  in  the  cost  of  wheat  is 
explained  largely  by  the  fact  that  the  average  crop  in  1916  and  1917 
was  practically  400,000,000  bushels  smaller  than  that  in  1915  and  that, 
in  spite  of  greatly  decreased  exports,  wheat  on  hand  at  the  end  of  the 
crop  years  fell  off  122,000,000  bushels  in  1916-17  and  34,000,000 
bushels  in  1917-18.  On  July  1,  1916,  estimated  stocks  of  wheat 
in  the  United  States  amounted  to  177,000,000  bushels  and  two 
years  later  to  only  21,000,000  bushels. 

Until  1917-18  miscellaneous  milling  was  a  negligible  factor  in  the 
operations  of  the  37  companies,  but  on  account  of  their  increased 
output  of  coarse  grain  products  in  that  year  a  satisfactory  separation 
of  wheat-flour  investment  from  the  increased  miscellaneous  milling: 
mvestment  would  have  been  desirable  but  was  impossible.  There- 
fore, wheat-flour  profits  and  miscellaneous  milling  profits  were 
necessarily  combined  in  ascertaining  the  rate  of  return  on  investment 
for  that  year.  Average  investment  per  barrel  for  the  37  companies 
thus  determined  increased  from  $1.14  in  1913-14  to  $1.90  in  1917-18 
and  profit  per  barrel  from  14  cents  to  65  cents. 

In  1913-14  the  per  barrel  investment  of  the  Northwestern  group 
was  14  per  cent  below  and  that  for  the  Eastern  group  53  per  cent 
above  the  average  for  the  37  companies,  but  in  1917-18  the  invest- 
ment for  the  Northwestern  group  was  only  6  per  cent  below  and  that 
for  the  Eastern  group  only  14  per  cent  above.  The  investment  for 
the  Southwestern  group  held  an  intermediate  position  in  all  years 
Costs  and  prices  per  barrel  for  the  different  groups  showed  this  same 
tendency  to  approach  each  other  during  the  five-year  period. 

The  data  used  in  this  report  on  the  whole  seem  to  indicate  that 
milling  companies  of  less  than  300,000  barrels'  annual  output  are 
relatively  less  profitable  than  the  larger  companies.  Among  the  com- 
panies having  an  output  over  300,000  barrels,  those  with  an  output 
below  1,000,000  compare  favorably  with  those  having  an  output  in 
excess  thereof. 
Respectfully, 

Victor  Murdock,  Chairman. 

Huston  Thompson. 

William  B   Colver. 

Nelson  B.  Gaskill. 

John  Garland  Pollard. 


< 


COMMERCIAL  WHEATFLOUR  MILLING. 


Chapter  I. 
•  GENERAL  SURVEY. 

Section  1.  Origin  and  scope  of  the  report. 

This  inquiry  had  its  origin  in  connection  with  the  general  food 
(  investigation  made  by  the  Commission,  but  was  later  continued  as  a 

t      separate  inquiry. 
^J.  It  includes  a  general  survey  of  flour  milling  in  the  United  States 

and  a  discussion  of  changes  in  prices,  costs,  and  profits  during  the 
'  years  1913-14  to  1917-18,  based  on  data  collected  from  the  records 
of  a  relatively  small  number  of  large  milling  companies.  These 
mills,  however,  produce  so  large  a  part  of  the  flour  sold  m  the  com- 
mercial flour  markets  of  the  United  States  that  prices  of  flour  through- 
out the  country  are  greatly  influenced  thereby.  The  milling  situa- 
tion on  the  Pacific  coast  is  also  discussed  briefly. 

Section  2.  Commercial  importance  of  wheat  flour. 
)  Wheat  flour  has  always  held  an  important  place  not  only  in  the 

domestic  but  also  in  the  foreign  commerce  of  the  United  States. 

Available  data  indicate  that  during  the  last  20  years  the  mill  value 

of  the  annual  output  has  ranged  from  $300,000,000  to  over  $1,000,- 
^        000,000,  and  in  recent  years  consumers  in  the  United  States  have 

paid  much  in  excess  of  the  latter  amount  for  their  supplies  of  wheat 

flour.* 

The  commercial  importance  of  flour  indicated  by  this  large  volume 
of  sales  is  the  more  significant  because  it  is  an  article  of  general 
consumption  and  must  consequently  be  carried  in  stock  by  a  very 
large  number  of  merchants.  The  increasing  concentration  of  flour 
mills  in  recent  years  has  involved  large  and  constantly  increasing 
expenditures  for  freight,  storage,  and  cartage.  Data  from  the 
.  Interstate  Commerce  Commission  indicate  that  fully   80  per  cent 

of  all  flour  now  made  is  shipped  by  rail  (see  Exhibit  I).     The  con- 
,        sumer  must  necessarily  pay  these  increased  charges. 

»  See  United  States  census  statistics  for  the  floiir  and  grist  mill  industry  and  tbe  Northwestern  Miller 
Jan.  7, 1920,  p.  56. 

U 


f  i 


12 


COMMERCIAL  WHEAT-FLOUE  MILLING. 


The  average  annual  exports  of  flour  and  of  wheat  by  decades  for 
the  last  50  years,  as  shown  in  the  following  statement,'  indicate  the 
importance  of  the  foreign  demand  for  these  products: 


Fiscal  years. 

Floor. 

Whaat 

1870-1879 

$23,633,151 
46,533,323 
63,381,926 
62,231,967 

104,396,359 

S68,680,285 
97,788,609 
80,442,686 
66,723,817 

162,792,450 

1880-1889 : 

1890-1899 

1900-1909 

1910-1919 '.'..'.'.','. 

The  average  -figures  by  decades  do  not  bring  out  the  advantage 
to  the  United  States  of  this  foreign  market  in  years  when  the  wheat 
crop  is  much  in  excess  of  domestic  requirements.  As  early  as  1892 
flour  exports  amounted  to  $75,000,000.  This  figure  was  dupU- 
cated  in  the  following  year,  but  was  not  exceeded  imtil  the  opening 
year  of  the  European  War,  1914-15.  For  over  10  years  the  general 
tendency  was  for  the  wheat  crop  to  shrink  to  the  level  of  home  con- 
sumption, and  in  the  fiscal  year  1905  exports  of  flour  amoimted  to 
only  $40,000,000 — ^less  than  they  had  been  in  any  year  since  1886. 
Wheat  exports  also  reached  the  very  low  amount  of  $4,000,000  in 
that  year.  The  very  small  exports  of  flour  and  wheat  in  1905  were 
due  to  the  small  crop — 552,000,000  bushels — in  the  preceding  year. 
This  was  less  than  had  been  raised  in  1891  before  hard  winter  wheat 
had  become  such  an  important  part  of  the  total  crop. 

A  fairly  steady  increase  in  the  hard  winter-wheat  crop  of  Kansas 
and  neighboring  States,  together  with  the  recent  revival  in  soft- 
wheat  production  in  the  North  Central  States,  has  been  principally 
responsible  for  the  increase  in  the  wheat  harvest,  which  by  three- 
year  averages  of  official  estimates  was  as  follows: ' 

Bushels. 

1897-1899 621, 277, 000 

1902-1904 620,095,000 

1907-1 909 660,  689, 000 

1912-1914 794,888,000 

1917-1919 831,581,000 

This  increase  in  the  available  supply  of  wheat  made  it  possible  to 
export  $428,000,000  *  worth  of  wheat  and  flour  in  the  fiscal  year 
1915,  not  far  from  10  times  the  amount  exported  10  years  earlier 
and  equal  to  a  sixth  of  the  total  exports  of  domestic  products. 

Section  3.  Production  and  consnmption  of  wheat  flour  in  the  United 
States. 

Production. — Definite  information  as  to  the  flour  output  of  the 
United  States  is  confined  to  the  reports  of  the  Bureau  of  the  Census 

>  statistical  Abstract  of  the  United  States,  1918,  p.  787;  Monthly  Snmmary  of  Foreign  Commerce.  June 
1919,  p.  33. 

•  Department  of  Agrictilture  estimates.  The  department  publishes  revised  estimates  for  some  of  these 
years,  but  the  series  of  estimates  referred  to  is  considered  the  best  Ux  comparisons  covering  the  20  years. 

<  SUtistical  Abstract,  1918,  pp.  784, 787. 


i 


/ 


/ 


GENERAL  SUBYEY. 


13 


and  the  United  States  Grain  Corporation.  The  census  reports  give 
the  number  of  barrels  and  value  of  flour  produced  in  the  census 
years  1889,  1899,  and  1909.  They  also  furnish  the  same  information 
as  to  the  output  of  merchant  mills  for  the  census  years  1899,  1904, 
1909,  and  1914.*  The  output  in  barrels  and  the  bushels  of  wheat 
used  each  year  is  shown  in  the  following  table: 

Table  1. — ProdudtUm  of  wheat  Jlour  in  the  United  States^  as  reported  by  the  Centus,  1889, 

1899,  1909,  and  1914.^ 


Bushels  of 
wheat  used. 

Barrels  of  flour 
produced. 

Busheb 

used  per 

barreL 

All  mills: 

1889 

385, 749, 798 
489, 914, 004 
503,468,556 

471,306,986 
494, 095, 083 
496,480,314 
545,728,431 

80,948,977 
103,  524, 094 
107, 108, 461 

99, 763, 777 
104,013,278 
105,756,645 
116,403,770 

4.77 

1899 

4.78 

1909 

4.70 
4  72 

Mwchant  mills: 

1891 

1904 

4.75 
4.69 
4.60 

1903 

1914 

»  Data  for  1889  taken  from  Census  Bulletin,  Flouring  and  Grist  Mill  Products,  1902,  pp.  9  and  13:  for 
1899,  1904,  and  1909,  Census  Bulletin,  Statistics  for  the  Flour-mill  and  Gristmill  Industey,  1909,  p.  13: 
for  1914,  Census  of  Manufactures,  Flour-mill  and  Grist  mill  Products,  1914,  p.  12. 

The  Grain  Corporation  reports  show  a  production  of  115,373,723 
barrels  in  1917-18,  121,130,000  barrels  in  1918-19,  and  121,636,000 
barrels  in  the  eleven  months  ending  May  28,  1920.' 

The  figures  in  the  table  above  are,  of  course,  open  to  the  objection 
that  the  census  years  may  not  be  typical  years.  They,  however, 
probably  warrant  the  statement  that  in  the  25  years  following  1890 
flour  production  in  the  United  States  increased  between  40  and  50 
per  cent.  Compared  with  otiier  data  they  indicate  that  wheat- 
flour  milling  made  relatively  slow  progress.  They  show,  for  exam- 
ple, an  increase  of  only  41  per  cent  in  bushels  of  wheat  used  in  flour 
mills  between  1889  and  1914.  But  over  the  same  period  popula- 
tion increased  61  per  cent,  bales  of  cotton  used  in  American  cotton 
mills,  159  per  cent;  the  output  of  pig  iron  over  200  per  cent,  and 
that  of  coal  over  250  per  cent.^ 

One  of  the  most  interesting  facts  brought  out  by  the  table  is  that, 
taking  wheat  the  way  he  buys  it  and  the  way  he  mills  it,  the  Ameri- 
can miller  is  able,  year  after  year,  to  make  a  barrel  of  flour  from 
4.7  bushels.  The  maximum  consumption,  4.77  bushels  in  1889,  is 
less  than  2  per  cent  above  the  minimum,  4.69  bushels,  shown  for 
merchant  mills  in  1909  and  1914. 


•  The  Census  of  1870  reported  32,079,144  barrels  of  flour  made  in  merchant  mills.  Such  evidence  as  is 
Available  indicates  that  the  figure  would  be  considerably  larger  if  on  a  oomparaMe  basis  with  the  figures 
in  the  table.  For  this  reason  it  was  not  included  in  the  table.  No  flour  output  was  reported  by  the  Cen- 
sus of  1880.    Census,  1870,  vol.  3,  p.  599. 

•  Grain  and  Flour  Statistics  During  the  War,  United  States  Grain  Corporation,  p.  27;  United  States 
Grain  Corporation  Bulletin,  dated  June  8, 1920. 

'  statistical  Abstract  of  the  United  States,  1918,  pp.  776, 813, 814,  and  81& 


14 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


Consumption.— The  people  of  the  United  States  consume  annually 
for  all  purposes  about  1  barrel  of  flour  per  capita.  It  is  not  probable 
that  consumption  of  flour  in  this  country  has  ever  been  materially 
in  excess  of  that  amount  for  any  considerable  period.  In  some 
European  countries,  notably  France  and  Belgium,  per  capita  con- 
sumption of  flour  has  been  greater  by  about  50  per  cent.« 

The  statisticians  of  the  Food  Administration  compiled  data  on  the 
wheat  supply  of  the  United  States  and  its  uses  for  the  purpose  of 
determining  the  quantity  of  wheat  consumed  as  flour  in  the  United 
States.  Comparisons  of  their  compilation  with  census  reports  indi- 
cate that  from  4  to  8  per  cent  of  their  figure  for  bushels  of  wheat  con- 
sumed as  flour  is  probably  in  reality  wasted  in  storage  and  trans- 
portation and  rejected  as  unfit  for  millmg.  In  spite  of  this  probable 
exaggeration  of  the  actual  figures  their  results  are  the  best  available 
estimate  of  per  capita  consumption  of  wheat  as  flour  over  a  series 
of  years.  Consequently  they  have  been  used  in  the  following  table, 
together  with  their  equivalents  in  barrels  of  flour. 

Table  2.— Per  capita  consumption  of  flour  in  the  United  States,  by  fiscal  years,  1901-2 

to  1917-18. 


Tear. 


Per  oapitn  con- 
sumption. 


Bushels. 


1901-2 

1902-3 

19ai-4 

1904-5 

190^6 

1906-7... 

1907-8 

1908-9 

Average,  8  years 


5.43 
5.  OS 
5.34 
5.40 
5.55 
5.43 
5.20 
6.54 


Barrels. 


1.13 
1.06 
1.11 
1  13 
1.16 
1.13 
1  OS 
1.15 


5.37 


MS 


Year. 


1909-10 

1910-11 

1911-12 

1912  13 

1013-14     

1914-15 

W15-16 

1916-17 

1917-18 

Average,  9  >  ears 


Per  capita  con- 
sumption. 


Bushels. 


5.09 
5.02 
4.95 
4.94 
5.21 
4.82 
4  97 
4.70 
4.55 


4.91 


Barrels. 


1.06 
LOa 
1  03 
103 
1.01' 

i.no 

1.04 
.98 
.95 


1.03 


These  figures  are  based  on  a  series  of  estimates  and  are  presented 
merely  as  approximations,  which,  over  a  series  of  years,  however, 
show  tendencies  with  suflficient  accuracy  for  practical  purposes. 
They  leave  Uttle  doubt,  for  example,  that  the  per  capita  consump- 
tion of  flour  was  about  1  barrel  annually  during  the  first  decade  of 
the  present  century— probably  in  most  years  somewhat  more  than 
that.  They  establish  more  certainly,  however,  a  tendency  to  decreas- 
ing consumption,  which,  together  with  the  war  emergency,  resulted 
in  an  average  for  the  second  period  covered  by  the  table  practically 
10  per  cent  lower  than  for  the  first.  It  would  not  be  at  all  safe, 
however,  to  try  to  establish  the  degree  of  economy  in  flour  consump- 
tion on  account  of  the  war  by  a  comparison  of  the  figures  shown 
for  recent  years. 


'  statistical  Notes  on  Cereals,  June,  1919.  International  Institute  of  Agriculture,  p.  15. 


i 


GENERAL  SURVEY. 


15 


Section  4.  Flour  mills  and  flour  milling  in  the  United  States. 

Development  of  the  flour  and  grist  mill  industry. — From 
1850  to  1900,  according  to  the  census,  investments  in  flour  and  grist 
mills  (data  for  flour  mills  alone  are  not  available)  increased  in  round 
numbers  from  54  to  219  milhon  dollars.  This  fourfold  increase  in 
capital  was  accompanied  by  a  threefold  increase  in  wages  from  6  to 
18  million  dollars,  an  increase  in  value  of  output  from  136  to  561 
millions,  and  in  cost  of  materials  from  113  to  476  milUons.  The 
greatest  relative  increase  was  in  cost  of  materials,  the  least  in  cost 
of  labor.* 

The  number  of  mills  reporting  increased  from  11,891  in  1850  to 
25,258  in  1900,  but  these  figures  have  little  significance,  because  the 
flour  mills  whose  investment,  product,  etc.,  constituted  a  very  large 
and  increasing  part  of  the  preceding  figures  throughout  the  period 
may  have  constituted  a  much  larger  part  of  the  total  number  of 
mills  reporting  in  1850  than  in  1900.  In  the  census  of  1900  the 
segregation  of  flour  mills  from  the  other  mills  was  undertaken,  and 
it  was  found  that  of  the  25,258  mills  reporting  only  13,188  made 
flour.  Of  the  total  number  of  mills  9,476  were  merchant  mills — 
that  is,  mills  that  buy  cereals  and  sell  flour  and  other  cereal  products. 
The  progress  of  these  merchant  mills  from  1899  to  1914  is  shown  in 
the  following  table.^® 

Table  S.—DevelopmerU  of  merchant  milling  in  the  United  States  as  reported  by  the  census 

1899,  1904,  1909,  and  1914.  ' 


Number  of  estahlishments 

Persons  engaged  in  the  industry. 

Capital 

Salaries  and  wages 

Salaries 

Wages 

Rent  and  taws 

Cost  of  material.** 

Value  of  prolucts 

Value  added  by  manufactures  * . . 
Grain  ground,  bushels » 


1899 


9,476 

0) 

(189,281,330 

$21,543,154 

$5,257,991 

$16,285,163 

$428,116,757 

$r,01,396,304 

$73,279,547 

729.061,820 


1904 


10,0'>1 

59,623 

$265,117,434 

$27,174,553 

$7,352,35/ 

$19,822,196 

2$?,  196, 945 

$619,971,161 

$713,033,395 

$93,062,234 

754,945,729 


1909 


11,601 

66,054 

$349,151,779 

$33,981,153 

$12,516,767 

$21,164,386 

« $2, 754, 128 

$767,576,479 

$8<^,  584,405 

$116,007,926 

806,217,961 


1914 


10,788 

65,635 

$380,257,420 

$40,9^,303 

$16,370,141 

$24,593,162 

»$3,7»8,482 

$752,270,021 

$877,679,709 

$l25,40e,>)8S 

818,929,321 


*  Figures  not  available. 

•  Exclusive  of  internal-revenue  taxes. 
'Including  internal-revenue  taxes. 

*  Value  of  pro.iucis  less  ooat  of  materials. 

•  Inol'.idcs  wheat,  com,  rye,  buckwheat,  barley,  and  oats. 

Neighborhood  mills.— The  census  bulletins  for  1899  and  1909 
give  some  separate  data  for  the  small  mills  that  grind  for  a  toll,  or 
charge,  called  custom  mills.  Jn  1899  their  output  was  3,760,317 
barrels ;  in  1 909  only  1 ,351 ,81 6  barrels.  But  among  the  mills  classified 
by  the  census  as  merchant  mills  there  are  many  that  have  no  real 
standing  in  commercial  flour  markets.  For  example,  in  1909  the 
output  of  1,721  mills  listed  as  merchant  mills  amounted  to  only 
661,839  barrels-^not  much  more  than  a  barrel  per  day  for  each  mill. 

•Censas  Bulletin:  Flouring  and  Grist  Mill  Products,  1902,  pp.  3,  4. 

»  Census  of  Manufactures,  1914,  Flour-mill  and  Gristmill  Products,  p  i. 


16 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


In  1914  a  group  of  1,821  of  these  mills  made  only  717,020  barrels.  In 
neither  year  was  the  average  daily  output  per  mill  as  much  as  one 
and  one-half  barrels.  These  mills  may  well  be  classed  together  with 
the  custom  mills  as  neighborhood  mills.  This  entire  group  of  neigh- 
borhood mills  still  numbers  several  thousand,  but  it  made  less  than  2 
per  cent  of  the  country^s  output  of  flour  in  1909. 

Commercial  mills. — Excluding  the  neighborhood  mills  discussed 
on  the  preceding  page,  the  census  classification  shows  a  group  of 
mills  numbering  6,413  in  1904  and  decreasing  to  5,055  in  1914, 
which,  to  distinguish  them  from  the  neighborhood  mills,  are  termed 
commercial  mills  in  this  report.  In  all  probabihty  many  of  the 
5,055  mills  included  in  this  group  in  1914  sell  no  flour  outside  their 
own  immediate  neighborhood,  and  if  a  close  classification  were  pos- 
sible the  number  of  mills  whose  output  exercises  any  considerable 
influence  in  the  commercial  flour  markets  would  be  found  to  be  very 
much  less  than  5,000.  Nevertheless,  the  operations  of  flour  jobbers, 
and  cooperative  marketing  by  the  small  mills  themselves,  is  said  to 
cause  their  accumulated  offerings  to  influence  the  market  in  some 
degree  at  times.  The  number  of  commercial  miUs  thus  classified, 
and  their  wheat-flour  production  in  1909  and  1914,  are  shown  by 
States  in  the  following  table: 

Table  4. — Number  and  production  of  commercial  millSf  by  States  as  reported  by  the 

census,  1909  and  1914.' 


State. 


Minnesota 

Kansas 

New  York , 

Illinois 

Ohio 

Missouri 

Texas 

Indiana 

Pennsylvania... 

Michigan 

Washington 

Tennessee , 

Kentucky , 

Wisconsin , 

Nebraska , 

Virginia 

California 

North  Dakota... 

Oklahoma , 

Oregon , 

Iowa 

North  Cwolina. . 

Maryland 

Colorado 

South  Dakota. . . 

Montana 

West  Virginia. . . 

Idaho 

Utah 

Georgia 

Aikansas 

New  Jersey 

All  other  States. 


1909 


Number 

ofestab< 

lishments. 


Total. 


248 

209 

165 

222 

527 

388 

84 

411 

585 

293 

60 

274 

303 

149 

189 

245 

54 

58 

77 

95 

122 

157 

156 

39 

76 

12 

101 

44 

56 

27 

38 

58 

99 


Barrels 
produced. 


6,621 


22,771,362 

10,879,028 

6,666,696 

6,369,296 

6,687,729 

5,633,384 

3,335,231 

4,770,061 

3,610,339 

3,393,296 

2,797,792 

2,965,687 

2,808,618 

3,468,815 

2,264,861 

1,842,774 

1,800,349 

1,823,146 

2,199,995 

1,367,393 

1,505,009 

729,624 

1,091,390 

975,067 

965,970 

375,440 

608,953 

385,037 

458,498 

410,120 

231,444 

261,421 

650,981 


1914 


Number 
of  estab- 
lishments. 


105.094,806 


211 

172 

143 

189 

461 

355 

80 

338 

534 

238 

57 

290 

286 

96 

168 

299 

49 

52 

56 

63 

92 

191 

127 

42 

63 

26 

92 

42 

61 

17 

41 

36 

88 


Barrels 
produced. 


5,055 


27,117,914 

12,772,478 

8,492,489 

6,627,369 

5,667,605 

5,354,186 

4,085,185 

4,494,402 

3,857,993 

3,010,667 

3,760,873 

3,037,904 

2,696,843 

3,030,863 

2,375,810 

2,099,328 

1,778,345 

2,163,938 

2,068,536 

1,783,023 

1,473,196 

931,982 

1,073,760 

1,226,731 

919, 443 

870,065 

485,699 

568,711 

500,722 

340,075 

283,878 

158.504 

578,233 


115,686,750 


1  Goosus  of  Manufactures,  1914,  Floor-mill  and  OristmiU  Pitnlucts,  p.  15. 


^> 


GENERAL  SURVEY. 


17 


This  table  shows  the  relative  importance  of  commercial  TniHiTig  in 
the  different  States,  and  affords  interesting  evidence  of  the  country- 
wide extent  of  the  decrease  in  number  of  mills.  The  only  notable 
exceptions  to  this  rule  are  two  small  groups  of  States — Virginia, 
North  Carolina,  and  Tennessee  in  the  South  and  Colorado,  Montana, 
and  Utah  in  the  Rocky  Mountain  region. 

Localization  of  commercial  milling. — ^During  the  first  100 
years  of  its  history  practically  every  neighborhood  in  the  United 
States  had  its  own  mill  grinding  one  or  more  different  kinds  of  grains. 
For  the  past  40  years  or  more,  however,  the  production  of  wheat 

Map  I. 


MAP  OF  THE  UNITED  STATES 

showing  the  Wheat  FlourZone  set  off  from  Areas  of  Small  Wheat 

Flour  Output. 


^^2  AREAS  OF  SMALL 

WHEAT  FLOUR   OUTPUT 


POPULATION 
WHEAT  PRODUCTION 
FLOUR         •  • 

PER  CAPITA 


28MILLION 
36       •        .      BUl 
2.6       .        .      BBLS. 
0.1    BBLS. 


NOTE  -  T/?^  Wheat  Flour  Zone  irtcludes  a/f  States  t^nawn  to  tiave 
produced  a  Million  ffbls.  of  Flour  in  a  single  year. 

RPFFPPK.rc«/  wVJ'Jfo^li  ^"i^-^  ^''  ^^'^  'Bureau  of  the  Census  Estimates 
REFERENCES  <  Wheat  Product/ on    ts/a  -Bureau  of  Crop  estimates 
I  Flour  Production       isiQ  -  United  States  Grain  Corporation 


flour  has  been  shifting  from  these  small  neighborhood  mills  to  the 
larger  commercial  mills  refen^ed  to  above.  Furthermore,  these  new 
large  mills  have  been  located  in  centers  and  areas  offering  peculiar 
advantages  in  regard  to  wheat  supply  and  transportation  facilities, 
together  with  satisfactory  sources  of  power. 

As   a   consequence   of   this   development   of   wheat-flour  milling 

within  the  areas  which  produce  good  milling  wheat  in  adequate 

quantities,  it  is  easy  to  set  off  a  wheat-flour  zone,  as  shown  in  Map  I 

above.     Every  State  included  in  this  wheat-flour  zone  has  at  some 

183256°— 20 2 


mme. 


18 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


time  produced  more  than  a  million  barrels  of  flour  in  a  single  year. 
No  State  included  in  the  small  production  areas  has  ever,  so  far  as 
known,  produced  a  million  barrels  in  a  single  year,  nor  in  recent 
years  much  in  excess  of  half  a  million  barrels. 

The  States  are  listed  below  in  order  of  output,  together  with  the 
barrels  of  flour  produced  by  each  in  the  year  ending  June  27,  1919, 
according  to  the  reports  of  the  Grain  Corporation: 


States  in  wheat-flour  zone. 

Barrels. 

Minnesota 28, 273, 000 

Kansas 12,668,000 

New  York 8,690,000 

Missouri 8,021,000 

Illinois 6,  339, 000 

Ohio 5,  544, 000 

Washington 4,  817, 000 

Texas 3,628,000 

Indiana 3,583,000 

California 3,137,000 

Oklahoma 3,106,000 

Oregon 2,918,000 

Nebraska 2,914,000 

Pennsylvania 2, 630, 000 

Tennessee 2,555,000 

Kentucky 2, 491, 000 

Michigan 2,274,000 

North  Dakota 2,236,000 

Virginia 2,082,000 

Montana 1,934,000 

Wisconsin 1,709,000 

Iowa 1,522,000 

Colorado 1,481,000 

North  Carolina 1,268,000 

Idaho 1,024,000 

Maryland »  999, 000 

South  Dakota 670.000 

>  Includes  flour  produced  in  the  District  of  Columbia. 
*  Production  in  1914  according  to  the  census. 


Stales  in  small-production  areax. 


Barrels. 

566,000 

502,000 

475,000 

314, 000 

116,000 

104,000 

89, 000 

86,000 

83,000 

81,000 

78,000 

78,000 

38,000 

Massachusetts ^  14, 000 


Utah 

Georgia 

West  Virginia. . . 

Arkansas 

Wyoming 

South  Carolina.. 

Delaware 

Arizona 

New  Jersey 

New  Mexico 

Nevada 

New  Hampshire. 
Alabama 


Maine 

Vermont 

Louisiana 

Mississippi 

Florida 

Connecticut. . 
Rhode  Island. 


»9,000 
»3,000 


7,000 


•  No  information  available. 


The  total  production  shown  ahove  for  the  Wheat  Flour  Zone  was 
about  118  million  barrels;  for  the  small-production  areas,  less  than 
3  million  barrels.  The  per  capita  production  was  respectively  1.5 
and  0.1  barrels.  Assuming  that  consumption  was  approximately  1 
barrel  per  capita  "  in  the  Wheat  Flour  Zone,  its  mills  made  about 
50  per  cent  more  flour  than  it  required  for  its  own  use.  On  the 
same  basis  the  States  in  the  small-production  areas  supplied  only 
about  a  tenth  of  their  own  needs.  Again,  accepting  the  same 
estimate  of  consumption,  since  the  estimated  population  of  the  Wheat 

11  One  barrel  per  capita  is  approximately  the  estimated  average  consumption  for  the  entire  United  States 
shown  on  p.  14. 


< 


A 


1 


^ 


GENERAL  SURVEY. 


19 


Flour  Zone  was  79  millions  in  1919  it  must  have  had  a  surplus  for 
sale  in  other  States  or  abroad,  approaching  40  million  barrels.  On 
this  same  basis,  since  the  States  in  the  small-production  areas  had 
a  population  of  28  millions,  they  must  have  obtained  from  other 
States  some  25  million  barrels  of  their  flour  supply.  In  1919  the 
Wheat  Flour  Zone  produced  906,411,000  bushels  of  wheat,  the 
small-production  areas  only  34,576,000  bushels. 

The  relation  of  different  States  to  commercial  milling,  indicated 
by  their  production  and  approximate  consumption  of  wheat  flour, 
.  is  the  basis  for  the  division  of  the  United  States  into  the  areas  shown 
on  Map  II  (facing  p.  20). 

The  small  production  areas  shown  on  this  map  do  not  include 
exactly  the  same  States  as  they  do  in  Map  I,  on  page  17,  because 
under  the  more  specific  classification  used  for  Map  II  the  States 
whose  consumption  is  considerably  in  excess  of  their  production 
have  been  transferred  to  buying  areas.  In  other  words,  this  map 
includes  under  the  title  ''Small  Production  Area''  only  States  whose 
consumption,  as  well  as  their  production,  is  relatively  of  small 
importance. 

The  States  of  considerable  importance  in  the  commercial  flour 
market  have  been  divided  into  three  main  groups,  and  Map  II 
shows  the  territory  occupied  by  each  of  these  groups,  divided  into 
areas  determined  by  location,  but  also  in  accordance  with  other 
distinctive  characteristics  of  the  different  areas.  The  first  group, 
which  constitutes  the  ''Selling  Areas,"  includes  only  those  States 
each  of  which  have  an  approximate  commercial  market  surplus,  or 
excess  of  production  over  consumption  "  amounting  to  over  1,000,000 
barrels."  The  second  group,  which  constitutes  the  "Buying  Areas,*' 
includes  only  those  States  each  of  which  have  an  approximate  demand 
for  flour  from  other  States,  determined  by  the  same  method,  amount- 
ing to  over  1,000,000  barrels.  There  remains  a  third  group  of 
States  located  in  the  Wheat  Flour  Zone  shown  on  Map  I  which 
does  not  come  under  either  of  these  classifications,  because  on  the 
same  basis  none  of  them  show  an  annual  commercial  market  surplus 
or  deficit  amounting  to  1,000,000  barrels.  The  failure  of  these 
States  to  classify  in  either  the  selling  or  buying  group  has  made  it 
convenient  to  designate  the  territory  occupied  by  them  as  Neutral 
Areas. 

Northwestern  Selling  Area. — ^For  30  years  the  most  important 
group  of  commercial  mills  in  the  United  States  has  been  located 
in  the  State  of  Minnesota.  In  recent  years  the  milUng  industry  has 
also  been  growing  rapidly  in  North  Dakota  and  Montana.     These 

w  The  number  of  barrels  consumed  is  assumed  to  be  equal  to  the  estimated  population  of  the  States. 
M  The  only  exception  to  this  rule  is  the  State  of  Idaho,  which  is  Included  in  the  Pacific  Selling  Area 
because  of  its  production  of  ova:  2  barrels  per  capita  and  its  rapidly  increasing  output. 


20 


COMMERCIAL  WHEAT-FLOUR  MILLINQ. 


J 


three  States  constitute  a  large  part  of  the  area  generally  known  in 
the  grain  and  flour  trade  as  the  Northwest.  The  extraordinary 
development  of  wheat-flour  milling  in  this  area  during  the  last  50 
years  is  due  to  its  large  production  of  hard  spring  wheat,  and  the 
recognition,  practically  throughout  the  world,  of  the  excellence  of 
hard  spring  wheat  flour.  According  to  the  census  of  1870  the  value 
of  flour  and  grist  mill  products  in  Minnesota  was  $7,534,575."  There 
was  an  eightfold  increase  in  the  next  20  years,  the  wheat  flour  alone 
being  valued  at  $54,029,614  in  1889.^*  In  that  year  the  State  made 
13  million  barrels  of  flour — af  least  11  million  barrels  more  than  the 
probable  consumption  by  its  own  people.  In  10  years  more  this  sur- 
plus had  increased  to  20  million  barrels. 

According  to  the  map  the  Northwestern  Selhng  Area  produced  32.4 
million  barrels  of  flour  in  1918-19,  although  it  had  a  population  of  only 

3.7  millions.  It  apparently  sells  to  other  States  and  abroad  between  25 
and  30  million  barrels  of  flour  each  year.     Its  per  capita  production  of 

8.8  barrels  is  not  approached  by  any  other  area.  The  map  shows  that 
over  three-fourths  of  the  wheat  harvested  in  this  area  in  1918  was 
hard  spring  wheat.*'  However,  in  spite  of  the  very  good  harvest  of 
that  year  the  quantity  of  hard  spring  wheat  produced  was  but 
little  over  150  million  bushels.  When  this  is  compared  with  the 
flour  produced  in  1918-19,  amounting  to  32.4  million  barrels,  some 
question  is  at  once  raised  as  to  a  continued  satisfactory  supply  of 
this  wheat  for  the  mills  of  this  area,  after  providing  seed  and  allowing 
for  waste.  The  importance  of  this  matter  is  emphasized  by  the 
decrease  in  the  total  wheat  crop  of  the  area  from  206  million  bushels 
in  1918  to  102  milHon  bushels  in  1919,  in  spite  of  an  insignificant 
increase  in  the  acreage  sown. 

It  should  be  noted,  however,  that  a  considerable  part  of  the  75 
miUion  bushels  of  hard  spring  wheat  produced  in  the  Central  Neutral 
Area  is  grown  in  States  adjacent  to  Minnesota  and  finds  its  best 
market  in  that  State. 

The  table  below  compares  the  wheat  crop,  the  flour  production, 
and  the  population  of  the  Northwestern  Selling  Area  for  specified 
periods  between  1899  and  1919  at  five-year  intervals.  The  wheat 
crop  is  the  average  of  three  crops  for  the  periods  indicated  as  esti- 
mated by  the  Department  of  Agriculture.  (See  p.  12.)  The  flour 
production  is  the  merchant  mill  output"  reported  by  the  census, 

M  Census  1870,  vol.  3,  p.  536. 

»  Census  Bulletin,  Flouring  and  Grist  Mill  Products,  1902,  p.  13. 

»  See  Exhibit  H,  p.  108,  for  the  percentage  table  on  which  the  figures  for  hard  spring,  hard  winter,  and 
Other  wheats  shown  on  the  map  are  based.  The  necessarily  approximate  character  of  all  such  expert  esti- 
mates has  already  been  noted. 

w  It  would  have  been  desirable  to  have  used  the  production  in  all  mills,  but  It  was  not  available  by  States 
for  1904, 1909,  and  1914.  Merchant  mill  output  for  the  entire  country,  however,  constituted  99.38  per  cent 
of  total  production  in  1914.  Furthermore,  total  production  has  been  used  for  the  comparisons  between 
1899  and  1919,  as  shown  in  Table  12. 


''ikaSfi|^K3«r- 


Mat  n. 
WHEAT  FLOUR  PRODUCTION  AND  DISTRIBUTION  AREAS 

NotS:  Setting  ffreasmdude  sfafestiaving  a  mitt/on  barrels  estimated  surplus  f/our  output;  Buying  fJreas.siafes  having  a  mi/lion  barrels  estima  fed  deficit.  Small  Production  Areas,  states  having 

less  than  a  million  barrels  of  production  and  also  less  than  a  mill/on  barrels  of  consumption;  Neutral  Ureas,  all  other  states. 


I 


'  •  .  •  •  .  •  .* 


**-r^ 


A 


^9 


»«S2! 


:k\ 


:•'•' 


•'.'.', 


^ 


^ 


Q^ 


* 


CEMTJ 


.L 


\ih 


JULILOMt 


/J.J 
7./ 

wmeirrcnop(MiuiONBUi)     ZZi.z 

'■  ■i.^  f/y^iOFT  WINTBR  7I.A 

■^H»ffOSPP/NG  S.  6 

^-SOFTSPRINa 


tVHEflT  CROP(MlLlJONBufi) 

SOFT  WINTER    V/ 

HRRO  SPRING 

HRRO  WINTER 

DURUM 

SOFTSPfflNS 
\FLOURPRODUC'  , 

k       TION  (MILLION  BBLS) 

PER  CftPI TR  (BBLS) 
SpoPULRTION  (MILLIONS) 


^ 


^44 


f  Population.  July  t*^  1919-  Bureau  of  the  Census  estimates 
Rtr£HtHC%s{  Wheat l*roaucf /on    laia -Bureau of  CropEstlmates 

\Flour  Production  i9i&-t9-  United  States  drain  Corporation 


183256*— 20.     To  face  page  90.) 


GENERAL  SURVEY. 


21 


]y 


except  for  1919,  which  is  the  production  reported  by  the  Grain  Cor- 
poration. The  population  is  the  census  estimate  for  July  1  of  the 
given  year. 

Table  5. — Wheat  crop,  flour  production,  and  population  in  the  Northwestern  Selling 

Area,  1899,  1904,  1909,  1914,  and  1919. 


Period. 


1897-1899 
19G2-1904 
1907-1909 
1912-1914 
1917-1919 


Estimated 

average  annual 

wheat  crop. 


BusheU. 

127,917,484 

132,830,162 

149,183,081 

180,231,667 

144,593,333 


Year. 


1899 
1904 
1909 
1914 
1919 


Flour  pro- 
duction. 


BarreU. 

23,883,486 

25,392,252 

24,938,764 

30, 169, 151 

32,443,000 


Estimated 
population. 


2,252,4S2 
2,609,500 
2,971,502 
3,333,499 
3,695,498 


Except  for  the  1909  figures,  the  table  indicates  a  steady  increase 
in  flour  production.*®  In  1899  the  indicated  surplus  over  consump- 
tion was  21  i  millions.  Owing  to  the  relatively  small  production  in 
1909,  no  appreciable  increase  in  the  surplus  is  indicated  for  the  first 
10  years  of  the  period.  From  1909  to  1919,  on  the  contrary,  there 
was  an  increase  of  7i  million  barrels  in  output  and  an  indicated  in- 
crease in  surplus  amounting  to  six  or  seven  millions.  The  wheat 
crop  has  not  increased  so  rapidly  as  flour  production,  and,  as  already 
noted  (see  p.  20),  even  in  good  years  hardly  enough  hard  spring 
wheat  is  harvested  to  provide  seed  and  a  sufiicient  supply  for  the 
mills  to  maintain  their  maximum  output.  As  the  table  shows,  the 
average  crop  of  the  last  three  harvests,  including  all  the  durum  r^nd 
other  varieties  of  wheat,  would  have  been  barely  sufficient  for  the 
flour  production  in  1918-19,  even  if  there  had  been  no  waste  and  no 
provision  for  seed. 

Southwestern  Selling  Area}* — Kansas  and  the  three  adjacent 
States — Nebraska,  Oklahoma,  and  Missouri — constitute  the  South- 
western Selling  Area.  This  is  unquestionably  the  area  that  now 
promises  most  in  the  way  of  increased  flour  production.  This,  how- 
ever, depends  in  part  on  the  assumption  that  its  people  will  be  willing 
to  use  their  own  soft  wheat  flour  to  some  extent  in  order  to  sell  the 
more  marketable  hard  wheat  flour. 

Map  II  shows  that  in  1918  this  Southwestern  area  produced  231 
million  bushels  of  wheat,  of  which  152  millions  was  the  hard  winter 
wheat  from  which  afloiu*  is  made  that  is  not  far  behind  the  hard  spring 
wheat  flour  in  its  bread-making  qualities.  The  difference  in  the 
quantities  of  hard  wheat  produced  in  the  two  principal  selling  areas 
is  apparently  negligible.  As  already  noted,  the  Southwestern  area 
has  an  advantage  over  the  Northwestern  in  a  greater  supply  of  soft 

»«  Per  capita  flour  production  in  the  Northwestern  Selling  Area  was  as  follows:  1899.  10.6  barrels;  1904, 
9.7  barrels;  1909,  8.4  barrels;  1914,  9.1  barrels;  1919,  8.8  barrels. 
1*  The  terriUH'y  tributary  to  Kansas  City  is  known  in  the  grain  and  flour  trade  as  the  Southwest. 


I 


•v; 


' 


22 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


wheat  which  it  can  use  itself  if  necessary,  but  also  a  disadvantage 
from  the  point  of  view  of  commercial  milling,  in  that  it  has  nearly 
two  and  one-half  times  as  large  a  population  to  supply  with  flour. 
Consequently,  although  it  makes  over  three-fourths  as  much  flour, 
26.7  million  barrels,  as  compared  with  32.4  millions,  its  surplus  for 
shipments  to  other  States  may  not  be  much,  if  any,  over  half  that 
sent  out  by  the  Northwestern  area. 

The  table  below  furnishes  the  same  data  for  the  Southwestern 
Selling  Area  that  are  shown  for  the  Northwestern  on  page  21. 

Table  6  — Wheat  crop,  flour  production,  and  population  in  the  Southwestern  Selling 

Area,  1899,  1904,  1909,  1914,  and  1919. 


Period. 


1897-1899 
1902-1904 
1907-1903 
1912-1914 
1917-1919 


Estimated 

average  annual 

wheat  crop. 


111,649,604 
163,536,221 
159,977,874 
244,735,333 
225,744,000 


Year. 


1899 
1904 
1909 
1914 
1919 


Flour  pro- 
duction. 


BarreU. 

12,884,074 

17,511,271 

21,032,602 

22, 635, 310 

26,709,000 


Estimated 
population. 


^,341,703 

7,012,668 
7,721,432 
8,430,190 
9,138,950 


In  general  the  table  shows  that  the  supply  of  wheat  has  more  than 
doubled  in  the  last  20  years  and  the  production  of  flour  ^  has  kept 
pace  with  it,  while  population  has  increased  less  than  50  per  cent. 
Consequently  its  indicated  surplus  for  shipment  to  other  sections  of 
the  country  increased  from  about  6.5  million  to  about  17.6  million 
barrels.  Apparently  the  wheat  fields  of  this  area  will  be  able  to 
supply  its  mills  abundantly,  even  if  its  surplus  flour  for  outside  mar- 
kets is  pushed  up  to  or  even  beyond  the  present  shipments  of  the 
Northwestern  Selling  Area.  It  is  to  be  remembered,  however,  that 
the  mills  of  the  Northwest  are  already  drawing  large  quantities  of 
wheat  from  this  area,  and  that  the  rapidly  increasing  flour  output 
of  Texas  is  in  part  due  to  the  ready  availability  of  hard  winter  wheat. 

Pacific  Selling  Area.— A  third  area  of  increasing  commercial  im- 
portance includes  Washington,  Oregon,  and  Idaho  in  the  Pacific 
Northwest.  The  large  surplus  of  wheat  in  this  area  and  its  great 
distance  from  important  flour  markets  results  in  a  lower  cost  of 
wheat  to  its  millers  than  to  those  of  any  other  important  producing 
section.  Consequently,  although  it  produces  many  varieties  of 
wheat,  most  of  which  are  decidedly  inferior  to  the  hard  wheats  of 
the  plains  States  for  the  production  of  bread-making  flours,  the  area 
is  always  able  to  find  a  market  for  its  increasing  flour  surplus  either 
in  California,  in  the  Orient,  in  South  America,  or  in  the  southeastern 
part  of  the  United  States. 

The  map  shows  that  this  area  produced  15  million  bushels  of  hard 
wheat  in  1918.    This  was  more  than  enough  to  supply  its  own  popu- 

»  Per  capita  floor  production  In  the  Southwestern  Selling  Area  was  u  follows:  1809,  2  barrels;  1904, 
U  bamls;  1900,  2.7  barrels;  1914,  2.7  barrels;  1910,  2.9  barrels. 


GENERAL   SURVEY. 


23 


5 


) 


i^ 


/. 


; 


\ 


^ 


-r* 


lation  with  hard-wheat  flour.  Apparently,  however,  flour  from  this 
wheat  does  not  have  the  same  bread-making  qualities  as  hard-wheat 
flour  made  farther  east,  since  that  flour  is  sold  in  the  Pacific  North- 
west at  a  premium  over  the  home  product.  The  wheat  production 
shown  on  the  map,  which  is  the  crop  of  1918,  was  considerably  below 
the  average  production  for  some  years  past.  As  a  matter  of  fact, 
the  available  surplus  wheat  is  sufficient  so  that  there  need  be  no 
immediate  concern  on  the  part  of  the  millers  on  that  score. 

The  table  below  furnishes  the  same  data  for  the  Pacific  Flour 
Selling  Area  that  are  shown  for  the  Northwestern  on  page  21. 

Table  7. — Wheat  crop,  flour  production,  and  population  in  the  Pacific  Selling  Area, 

1899,  1904y  1909,  1914,  and  1919. 


Period. 


1897-1899 
1902-1904 
1907-1909 
1912-1914 
1917-1919 


Estimated 

average  annual 

Year. 

wheat  crop. 

Bushels. 

44,793,967 

1899 

46,261,092 

1904 

58,590,250 

1909 

81,743,000 

1914 

65,366,000 

1919 

Flour 
production. 


Barrels. 
3,868,793 
5,074,612 
4, 550, 545 
6,128,369 
8,759,000 


Estimated 
population. 


1,063,168 
1,526,321 
2,056,416 
2,686,511 
3,116,606 


It  appears  from  the  above  table  that  there  is  slight  probability 
of  the  Pacific  Flour  Selling  Area  becoming  as  important  in  the  com- 
mercial flour  market  as  either  of  the  other  flour-selling  areas.  Its 
wheat  production  at  the  beginning  of  the  period  covered  by  the 
table  was  considerably  less  than  half  that  produced  in  either  of  the 
other  areas  and  the  increase  during  the  20  years  was  by  no  means 
so  rapid  as  it  was  in  the  Southwestern.  Nevertheless,  its  flour  pro- 
duction increased  from  3.9  million  barrels  in  1899  to  8.8  mUUon 
barrels  in  1919,  or  at  a  more  rapid  rate  than  the  increase  in  cither  of 
the  other  areas.^^  Population,  however,  was  increasing  still  more 
rapidly.  In  1899  it  was  less  than  one-half  that  of  the  Northwestern 
area  and  but  one-sixth  that  of  the  Southwestern.  But  in  1919  it  was 
five-sixths  that  of  the  Northwestern  and  over  a  third  that  of  the 
Southwestern.  Measuring  consumption  by  population,  the  indi- 
cated increase  in  the  Pacific  area  during  the  last  20  years  was  over 
2  million  barrels,  in  the  Northwestern  less  than  1  million  and  a  half, 
and  in  the  Southwestern  less  than  3  millions. 

In  spite  of  this  rapid  increase  in  the  population  of  the  Pacific 
Selling  Area,  its  indicated  surplus  of  flour  for  shipment  to  outside 
territory  shows  increases  in  each  of  the  years  covered  except  1909. 
On  the  generous  assumption  that  the  consumption  of  flour  in  the 
area  is  1§  barrels  per  capita,  the  surplus  for  export  in  1899  was 
about  2  million  barrels  and  increased  to  nearly  5  millions  in  1919; 
that  is,  in  spite  of  the  rapid  increase  in  population  and  the  less 

"  Per  capita  flour  production  in  the  Pacific  Flour  Selling  Area  was  as  follows:  1899,  3.6  barrels;  1904, 
8.3  barrels;  1909,  2.2  barrels;  1914,  2.4  barrels;  1919,  2.8  barrels. 


24 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


favorable  progress  of  the  wheat  supply  as  compared  with  the  South- 
west, the  surplus  flour  available  for  shipment  outside  its  territory 
probably  increased  at  a  faster  rate  in  this  area  than  in  either  of  the 
others. 

Eastern  Buying  Area, — ^The  above  description  of  flour-selling  areas 
shows  that  10  States  located  in  a  general  way4n  the  northwestern 
part  of  the  country  usually  produce  surplus  flour  to  the  amount  of 
40  to  50  million  barrels  annually.  On  the  other  hand,  seven  States 
located  east  of  the  Alleghenies  and  north  of  Virginia  and  nine  States 
in  the  South,  beginning  with  North  Carolina  and  ending  with  Texas, 
together  afford  a  market  for  from  30  to  35  million  barrels  of  flour 
sent  in  from  other  States. 

The  Eastern  Buying  Area,  which  includes  Massachusetts,  Rhode 
Island,  Connecticut,  New  York,  New  Jersey,  Pennsylvania,  and  West 
Virginia,  has  a  population  of  30.2  million  people  and  a  flour  produc- 
tion of  only  11.9  million  barrels,  or  0.4  of  a  barrel  per  capita.  On  the 
assumption  that  flour  consumption  in  this  territory  is  practically 
the  same  per  capita  as  the  average  for  the  United  States  in  recent 
years,  it  must  afford  a  market  for  outside  flour  to  the  amoimt  of  18 
to  20  million  barrels  annually.  This  area  produced  only  about  40 
million  bushels  of  wheat  in  1918 — much  less  than  was  used  in  its 
own  mills.     Ninety-five  per  cent  of  the  crop  was  soft  winter  w  heat. 

Most  of  the  mills  in  this  area  are  comparatively  small  and  are  so 
situated  that  it  would  be  impossible  for  them  to  maintain  the  standard 
qualities  in  their  product  which  is  required  in  flour  that  sells  readily 
in  commercial  markets. 

A  marked  exception  to  this  general  rule  is  the  group  of  large  mills 
located  at  Buffalo,  N.  Y.  The  advantage  of  lake  transportation 
for, hard  wheat  from  the  West  and  electric  power  from  Niagara 
Falls  enables  them  to  compete  successfully  with  the  western  mills. 
The  consequent  increase  of  the  flour  output  of  mills  in  Buffalo  and 
its  vicinity  from  about  2  millions  in  1904  to  an  average  of  over  6 
milHons  in  recent  years,"  has  raised  the  per  capita  production  of 
flour  in  this  area  far  beyond  what  it  otherwise  would  have  been. 

The  table  below  furnishes  the  same  data  for  the  Eastern  Buying 
Area  that  are  shown  for  the  Northwestern  on  page  21. 

Table  8. — Wheat  cropy  Jlour  production,  and  population  in  the  Eastern  Buying  Area^ 

1899,  1904,  1909,  1914,  and  1919. 


Period. 


1897-1899. 
1902-1904. 
1907-1909. 
1912-1914. 
1917-1919. 


Estimated 

average  annual 

wheat  crop. 


Bushels. 
41,199,091 
36,770,764 
39,934,436 
34,151,333 
42,066,000 


Year. 


1899 
1904 
1909 
1914 
1919 


Flour 
production. 


Barrels. 

10,604,845 

10,6?9,021 

11,369,357 

13,199,741 

11,892,420 


Estimated 
population. 


20,211,494 

22,625,378 
25,159,550 
27,693,726 
30,227,896 


%- 


GENERAL  SURVEY. 


25 


»  The  Millers  Almanac,  1918-19,  p.  149. 


The  foregoing  table  shows  a  situation  strikhigly  different  from  that 
which  exists  in  the  selling  areas.  The  first  four  periods  show  decreases 
in  the  wheat  supply,  but  under  the  stimulus  of  war  demand  the  last 
period  shows  a  crop  slightly  in  excess  of  that  raised  20  years  before. 
In  marked  contrast  the  population  has  increased  from  20  millions 
at  the  beginning  of  the  period  to  30  millions  at  the  end.  That  is, 
there  has  been  an  increase  of  50  per  cent  in  the  demand  for  flour  with 
practically  no  increase  in  the  supply  of  wheat.  Flour  production 
shows  some  increase;  more,  indeed,  than  the  increase  in  the  wheat 
crop.*^  The  reason  for  this,  as  shown  above,  is  the  rapid  grow^th  of 
wheat-flour  production  in  Buffalo  and  vicinity.  Although  the  table 
shows  a  decrease  in  the  output  of  flour  from  a  little  over  13  milhon 
barrels  in  1914  to  something  less  than  12  millions  in  1919,  it  would 
not  be  safe  to  argue  from  this  that  a  tendency  to  declining  output 
has  been  established.  The  probability  is  that  this  decrease  is  in 
considerable  part  due  to  Government  activities  affecting  the  produc- 
tion of  flour  during  the  war  and  since  then. 

Southern  Buying  Area. — ^This  area  includes  the  States  of  North  and 
vSouth  Carolina,  Georgia,  Florida,  Alabama,  Mississippi,  Louisiana, 
Arkansas,  and  Texas.  The  dependence  of  a  considerable  part  of 
this  territory  on  outside  sources  for  its  wheat-flour  supply  is  not 
fully  brought  out  by  the  map  because  of  the  recent  development  of 
hard  winter  wheat  milling  in  Texas  and  a  still  more  notable  increase 
in  both  the  wheat  crop  and  the  flour  production  of  North  Carolina, 
which  together  increase  the  figures  shown  for  the  entire  area  very 
considerably.  Indeed,  while  only  about  one-third  of  the  population 
of  the  area  resides  in  these  two  States,  they  produce  over  80  per  cent 
both  of  its  flour  output  and  of  its  wheat  crop. 

In  spite  of  the  rapid  increase  in  flour  production  in  Texas  and 
North  Carolina,  which,  if  continued,  will  in  no  long  time  render  them 
independent  of  the  surplus  flour  producing  States,  they  each  buy 
over  a  million  barrels  of  flour  annually  from  other  States  at  the 
present  time  and  have,  for  that  reason,  been  grouped  with  other 
States  in  the  Southern  Buying  Area. 

The  map  shows  that  this  area  has  a  population  of  21  millions,  and 
that  in  1918-19  it  produced  only  6  million  barrels  of  flour.  Even 
this  small  production  could  hardly  have  been  made  from  its  wheat 
crop  in  1918  after  providing  for  seed  and  ordinary  waste  in  storage 
and  transportation.  The  wheat  that  is  produced  is  in  large  part 
soft  winter  wheat,  although  Texas  is  developing  the  production  of 
hard  winter  wheat  on  its  high  northern  plains.  Even  including 
Texas  and  North  Carolina  the  area  probably  produces  but  Uttle,  if 
anv,  more  than  a  third  of  the  flour  it  consumes. 

»  Per  capita  flour  production  in  the  Eastern  Buying  Area  was  as  follows:  1899,  0.62  barrels;  1904,  0.47 
barrels;  1909, 0.45  barrels;  1914, 0.48  barrels;  1919, 0.39  barrels. 


26 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


It  is  hardly  necessary  in  this  report  to  enter  into  a  discussion  of  the 
natural  advantages  of  this  area  in  the  production  of  cotton  and  other 
semitropical  products,  or  to  point  to  its  relative  disadvantages  in  the 
production  of  wheat,  or  of  flour  that  would  satisfy  the  requirements 
of  its  large  central  markets. 

The  table  below  furnishes  the  same  data  for  the  Southern  Buying 
Area  that  are  shown  in  the  table  on  page  21  for  the  Northwestern: 

Table  9. — Wheat  crop,  flour  production,  and  population  in  the  Southern  Buying  Area, 

1899,  1904,  1909,  1914,  and  1919. 


Period. 


1897-1899 
1902-1904 
1907-1909 
1912-1914 
1917-1919 


Estimated 

average  annual 

wheat  crop. 


Bushels. 
19, 832. 018 
24, 336.  826 
15. 853,  057 
23.606.000 
35,852,333 


Year. 


1899 
1904 
1909 
1914 
1919 


Flour 
production. 


Barrels. 
4,496.368 
6, 109, 952 
4, 821, 702 
5, 719. 892 
5,861,000 


E<;ti  mated 
population. 


14. 842. 579 
16. 360. 041 
17,901,884 
19,443,734 
20,985,584 


This  area  has  increased  its  wheat  crop  in  the  last  20  years  more 
rapidly  than  any  other  area  shown  on  the  map,  except  the  South- 
western Selling  Area  and  the  Western  Small  Production  Area. 
But  Texas  produced  31  million  bushels  of  wheat  in  1919  in  contrast 
with  an  average  production  for  the  whole  area  in  1907,  1908, 1909 
of  only  16  million  bushels.  Nevertheless,  detail  figures  for  all  the 
States  except  South  Carolina,  Florida,  and  Louisiana  show  large 
increases  in  the  last  10  years.  The  very  great  increase  in  the  last 
period  was  undoubtedly  in  large  part  due  to  the  war.  It  appears 
probable,  however,  that  the  Cotton  States  are  really  making  progress 
in  the  diversification  of  their  farm  products. 

In  spite  of  the  remarkable  increase  in  the  flour  output  of  North 
Carolina  and  Texas,  flour  production  for  the  entire  area  increased 
only  about  IJ  million  barrels,^*  while  population  increased  6  mil- 
lions.** 

Central  Neutral  Area, — ^As  already  noted,  large  production  States 
which  apparently  have  annual  wheat-flour  surpluses  or  deficits  of 
less  than  1,000,000  barrels  have  been  grouped  in  areas  designated 
as  "Neutral."  They  occupy  territory  which  has  been  divided  into 
the  Central,  Southeastern,  and  Western  Neutral  Areas.  Possibly 
the  low-flour  output,  hard-wheat  producing  States — South  Dakota, 
Iowa,  and  Wisconsin — could  have  been  set  off  in  a  separate  group 

s*  This  is  the  only  area  in  which  the  use  of  merchant  mill  output  instead  of  total  production  materially 
affects  these  comparisons.  If  total  production  in  the  Southern  Buying  Area  is  used  for  1899,  this  increase 
shrinks  to  600,000  barrels. 

>&  Per  capita  production  of  flour  in  the  Southern  Buying  Area  was  as  follows:  1899, 0.30  barrels;  1904,0.31 
barreJs;  1909. 0.27  barrels;  1914,  0.29  barrels;  1919,  0.28  barrels. 


\t 


r 


I 


Lf 


\ 


GENERAL  SURVEY. 


27 


to  advantage,  but  they  have  been  included  with  Illinois,  Michigan, 
Indiana,  and  Ohio  in  the  Central  Neutral  Area. 

This  area  produces  more  wheat  than  either  of  the  great  flour- 
selling  areas,  yet  according  to  the  data  on  the  map  its  mills  apparently 
fail  to  manufacture  enough  flour  for  its  own  population,  the  flour 
production  being  shown  as  only  21.6  million  barrels,  while  the  popu- 
lation numbers  23.3  millions.  This  gives  a  per  capita  production 
of  only  0.9  barrels — somewhat  less  than  the  average  per  capita 
consumption  of  the  entire  country.  Two  reasons  for  this  situation 
appear  quite  clear.  Most  mills  in  this  area  are  much  smaller  than 
those  in  the  selling  areas,  and  their  limited  output,  together  with 
transportation  difficulties,  make  it  impossible  for  them  to  produce 
the  constantly  maintained  and  standardized  quality  of  flour  required 
in  a  commercial  market.  They  are  also  at  a  disadvantage  in  that, 
although  they  have  an  abundant  supply  of  soft  wheat  readily  avail- 
able, it  is  possible  to  sell  only  a  limited  quantity  of  soft  wheat  flour 
in  competition  with  the  hard  wheat  flours  produced  farther  west, 
and  such  sales  must  be  made  at  a  considerable  discount  below  hard 
wheat  flour  prices. 

It  should  be  noted  further  that  some  of  the  hard  wheats  produced 
in  the  northwestern  section  of  this  area  are  undoubtedly  shipped 
into  and  ground  in  the  hard  wheat  flour  selling  areas.  The  table 
below  shows  the  same  data  for  the  Central  Neutral  Area  as  are 
shown  for  the  Northwestern  on  page  21. 

Table  10. — Wheat  crop,  flour  production,  and  population  in  the  Central  Neutral  Area, 

1899,  1904,  1909,  1914,  and  1919. 


Period. 


1897-1899 
1902-1904 
1907-1909 
1912-1914 
1917-1919 


Estimated 

average  annual 

wheat  crop. 


Bushels. 
186, 497, 083 
150, 988, 598 
170, 175, 070 
160,772,667 
230,790,333 


Year. 


1899 
1904 
1909 
1914 
1919 


Flour 
production. 


Barrels. 
30,  P39. 443 
27, 276, 069 
2*1,344,245 
25.401.222 
21,641,000 


Estimated 
population. 


18,355,022 
19. 62S.  065 
20.  m%  648 
22,102,246 
23.341.415 


The  decrease  of  9  million  barrels  in  the  flour  production  of  this 
area  in  a  20-year  periodj^**  during  which  its  population  increased  5 
millions,  is  one  of  the  most  interesting  contrasts  that  has  developed 
in  the  industry.  Because  of  these  changes  its  indicated  surplus  for 
shipment  into  other  areas,  or  abroad,  which  amounted  to  12.3  mil- 
lion barrels  in  1899,  was  replaced  by  an  indicated  deficit  in  its  own 
flour  markets  amounting  to  1.7  million  barrels.     As  a  matter  of  fact, 


»  Per  capita  floiu-  production  in  the  Central  Neutral  Area  was  as  follows:  1899, 1.7  barrels;  1901, 1.4  bar* 
rels;  1909, 1.3  barrels;  1914, 1.1  barrels;  1919,  0.9  barreL 


28 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


it  has  retained  a  considerable  part  of  its  trade  in  outside  territory, 
and  its  own  population  consumes  a  corresponding  amount  of  hard- 
wheat  flours  shipped  in  from  the  West.  In  a  general  way  wheat  and 
flour  output  went  down  together  during  the  first  15  years.  It  is 
quite  impossible  to  tell  whether  or  not  this  tendency  would  have 
been  continued  had  it  not  been  for  higher  wheat  prices  and  Govern- 
ment regulation  of  flour  milling  in  recent  years.  It  certainly  may  be 
questioned,  however,  whether  the  revival  of  soft-wheat  production 
in  this  area  will  result  in  a  corresponding  increase  in  its  output  of 
flour.  On  the  other  hand,  it  is  altogether  improbable  that  the  up- 
ward trend  of  the  crop  and  the  downward  trend  of  the  flour  output 
shown  from  1914  to  1919  can  continue  for  any  length  of  time. 

Southeastern  Neutral  Area. — ^The  States  of  Kentucky,  Tennessee, 
Maryland,  and  Virginia  have  had  a  sufficiently  different  experience 
from  the  neutral  area  farther  west  to  warrant  setting  them  off  as  the 
"Southeastern  Neutral  Area.*'  The  crop  in  this  area  is  composed 
entirely  of  soft  winter  wheat.  This  is  produced  apparently  in  nearly 
sufficient  quantity  to  supply  its  mills  and  seed  its  fields.  The  mills 
in  turn  appear  to  produce  nearly — possibly  quite — enough  flour  to 
supply  the  population,  since  these  States  are  supposed  to  use  corn 
meal  in  considerable  quantity. 

The  table  below  furnishes  the  same  data  for  the  Southeastern 
Neutral  Area  that  are  shown  for  the  Northwestern  on  page  21. 

Table  11. — Wheat  crop,  flour  production^  and  population  in  the  Southeastern  Neutral 

Area,  1899,  1904,  1909,  1914,  and  1919. 


Period. 

Estimated  aver- 
age annual 
wheat  crop. 

Year. 

Flour  pro- 
duction. 

Estimated 
population. 

1897-1899 

Bi/shfh. 
46,214,835 
31,700,370 
36,792,082 
38,884,333 
43,247,333 

1899 
1904 
1909 
1914 
1919 

Barrels. 
8,811,547 
8,658,002 
8,892,454 
9,089,015 
8,127,000 

7.403  135 

1902-1904 

7,767,431 
8,108,689 
8,449,947 
8,791,207 

1907- 1909 

1912-1914 

1917-1919 

This  area  appears  to  be  in  every  respect  more  stationary  than  the 
others  so  far  reviewed.  Its  population  shows  considerably  less  than 
one-half  the  rate  of  increase  in  the  country  as  a  whole,  and  the  fig- 
ures establish  no  trend  in  regard  to  flour  production."  This  means, 
of  course,  a  slight  decline  in  per  capita  output.  On  the  whole,  in 
spite  of  the  larger  crop  shown  for  the  last  period,  the  indication  is 
that  the  wheat  crop  is  declining  and  probably  does  not  fully  supply 

^  Per  capita  flour  production  in  the  Southeastern  Neutral  Area  was  as  follows:  1899,  1.2  barrels;  1904, 
1.1  barrels;  1909, 1.1  barrels;  1914, 1.1  barrels;  1919, 0.9  barreL 


GENERAL  SURVEY. 


29 


< 


i 


the  mills  in  the  area.     The  surplus  soft  wheat  of  the  Central  Area  is, 
however,  readily  available. 

Western  Neutral  Areas. — California  and  Colorado  in  the  West  each 
produce  more  than  a  million  barrels  of  flour  and  under  the  rule  fol- 
lowed can  not  be  classified  either  in  the  buying  or  selling  areas.  Since 
California  is  apparently  losing  rank  as  a  wheat  and  flour  producer, 
while  Colorado  is  making  rapid  progress,  nothing  would  be  gained 
by  combining  data  for  the  two  States. 

During  the  20  years  under  review  progress  of  population  was  simi- 
lar—a little  less  than  100  per  cent  for  Colorado  but  something  over 
100  per  cent  for  California.  On  the  other  hand,  from  1899  to  1914 
Colorado's  wheat  production  (three-year  average)  increased  from  5.8 
to  10.7  million  bushels,  while  that  of  California  fell  off  from  27  mil- 
lion bushels  to  5.8  millions.  During  the  war  California's  crop  in- 
creased again  to  10.5  million  bushels  and  Colorado's  crop  went  on 
up  to  14.8  millions.  California's  flour  output  showed  a  consistent 
decline  from  2.7  million  barrels  in  1899  to  1.8  millions  in  1914,  but  in 
1919  it  amounted  to  3.1  millions.  Colorado's  flour  output  did  not 
respond  to  the  increasing  supply  of  wheat  in  the  first  ten  years,  but 
in  the  second  it  increased  from  a  million  to  a  million  and  a  half 
barrels. 

Small  Production  Areas. — ^There  are  nine  States — Wyoming,  Utah, 
New  Mexico,  Arizona,  and  Nevada  in  the  West,  and  Maine,  New 
Hampshire,  Vermont,  and  Delaware  in  the  East — whose  combined 
output  of  flour  is  but  little  more  than  a  million  barrels  a  year.  In 
fact,  up  to  1909  it  was  less  than  a  million.  Their  wheat  crop  is  almost 
as  insignificant.  It  is  worthy  of  note,  however,  that  it  nearly  doubled 
during  the  20  years,  amounting  to  2.4  million  bushels  in  the  Eastern 
States  in  1919  and  16.2  millions  in  the  Western  States.  The  popu- 
lation of  the  Western  States  doubled  in  the  20  years,  amounting  to 
1.5  millions  in  1919.  The  eastern  group  increased  its  population 
from  1.6  to  1.8  millions.  It  is  evident  that  the  entire  demand  for 
flour  from  other  States  is  relatively  insignificant.  Further  infor- 
mation in  regard  to  the  small  production  areas  as  well  as  the  other 
areas  will  be  found  in  Exhibit  III. 

Wheat  crop,  flour  production,  and  population  of  the  United  States, 
and  of  certain  area^  compared.^ — Wheat  crop,  flour  production,  and 
population  figures  for  the  United  States  as  a  whole  in  1899  and  in 
1919  are  shown  in  the  following  table,  together  with  the  percentages 

«  See  also  Exhibit  in.  It  would  have  been  instructive  to  have  pre-«^.nted  figures  on  acreage  so>fm  in 
this  connection,  but  satisfactory  statistics  were  not  obtained.  The  eftects  of  marked  changes  in  yield  per 
acre  have,  however,  been  noted  in  the  text. 


30 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


of  these  totals  found  in  the  more  important  areas  shown  on  Map  II 
(see  footnotes  to  table): 

Table  12. — Wheat  crop,  flour  production,  and  population  of  the  United  States  in  1899 
and  1919,  together  with  the  different  percentages  of  those  totals  found  in  the  more 
important  areas  shown  on  Map  II. 


United  States: 

1899 

1919 


Wheat 
crop.' 


Bvshfls. 
621,277,375 
831,. 580. 667 


Flour 
production.* 


BarrrJs. 
103, 524. 094 
121,15fi,373 


Popula- 
tion.* 


74,798.612 
106. 877. 895 


Northwestern  Selling  Area: 

}^ :.. -per  cent. 

Southwestern  Selling  Area: 

1899 

1919 ;;;;;; 

Pacific  Selling  Area: 

1899 

1919 ; 

Eastern  Buying  Area: 

1899 

1919 ; 

Southern  Buying  Area: 

1809 

1919 

Central  Neutral  Area: 

1899 

1919 

Southeastern  Neutral  Area: 

1899 

1919 ■ 


-do 

-do 

.do — 

.do 

.do — 

.do 

-do 

-do 

.do — . 

•do — 
.do 

.do — 
-do 


20.6 
17.4 

18.0 
27.1 

7.2 
7.9 

6.6 
&0 

3.2 
4.3 

30.0 
27.8 

7.5 
5.2 


23.2 
26.8 

12.9 
22.0 

3.8 
7.2 

11. 1 
9.8 

5.1 

4.8 

30.4 
17.9 

9.0 
6.7 


3.0 
3.5 

8.5 
8.6 

1.4 
2.9 

27.0 
28.3 

19.8 
19.6 


24. 
21. 


9.9 

8.2 


1  Average  of  crop  for  1897-98-99  and  1917-18-19,  Department  of  Agriculture  estimates. 
«  Bureau  of  Census  figures  for  1899  and  United  States  Grain  Corporation  figiu-es  for  1919. 
•  Bureau  of  the  Census  estimate  as  of  July  1. 

• 

This  table  shows,  as  has  already  been  noted,  that  from  1899  to 
1919  population  increased  over  twice  as  fast  as  flour  production. 
Wheat  made  better  progress  than  flour,  but  its  rate  of  increase,  in 
spite  of  the  war,  was  much  below  that  of  population.  It  is  not  to 
be  assumed  from  these  figures,  however,  that  wheat  farming  in  the 
United  States  will  continue  to  develop  more  rapidly  than  the  wheat- 
flour  industry.  The  probable  explanation  of  the  lag  in  flour  output 
compared  with  wheat  production  is  the  lack  of  assurance  on  the  part 
of  the  miller  that  the  increase  of  34  per  cent  in  20  years  shcrwn  by 
the  wheat  crop  is  to  be  accepted  as  so  much  permanent  addition  to 
their  readily  available  supplies  of  satisfactory  raw  material. 

Table  12  shows  that  during  the  20  years  it  covers,  the  Northwestern 
Selling  Area  added  3.6  per  cent  to  its  proportion  of  total  flour  output, 
but  that  the  addition  to  its  proportion  of  total  population  was  only 
0.6  per  cent  and  that  there  was  a  decrease  of  3.2  per  cent  in  its  wheat 
crop.  The  increasing  importance  of  this  area  in  the  commercial 
flour  markets  of  other  States  is  made  very  plain  by  this  comparison. 
It  also  indicates  a  very  considerable  dechne  in  its  relative  importance 
in  the  production  of  wheat.  This  is  probably  due  to  the  poor  yield 
per  acre  in  1917,  1918,  and  1919,  as  estimates  of  acreage  sown  show 
a  slight  increase.  Prior  to  1900  the  flour  industry  in  this  area  had 
been  developing  rapidly  because  of  the  ready  availability  of  hard 


> 


0 


GENERAL  SURVEY. 


31 


spring  wheat  in  excess  of  its  own  requirements.  The  excellence  of 
the  flour  made  from  this  wheat,  and  the  business  enterprise  of  the 
mills,  have  brought  about  the  situation  shown  by  Table  12,  in  which, 
apparently,  the  rapid  growth  of  the  flour  business  has  carried  it 
beyond  those  favorable  conditions  of  wheat  supply  which  existed 
between  1870  and  1900. 

The  contrast  between  this  situation  in  the  Northwest  and  that  in 
the  Southwest  is  striking.  There  the  readily  available  supply  of 
wheat,  much  of  it  of  an  excellence  that  makes  it  a  strong  competitor 
of  hard  spring  wheat,  is  still  increasing  rapidly,  and  the  remarkable 
expansion  of  the  flour  output  of  the  area  does  not  yet  seriously 
threaten  the  great  surplus  of  the  raw  material  which  is  responsible 
for  that  expansion.  The  population  figures  show  that  there  was 
practically  no  increase  in  its  relative  importance  as  a  market  for 
flour  during  the  20  years.  On  the  other  hand,  its  proportion  of  the 
total  flour  output  and  its  proportion  of  the  total  wheat  crop  were 
both  increased  by  9.1  per  cent.  The  estimated  increase  in  acreage 
sown  was  considerably  greater,  amounting  to  14.2  per  cent.  This 
means  that,  although  its  importance  in  the  flour  production  of  the 
United  States  had  increased  over  70  per  cent,  the  surplus  of  wheat 
on  which  that  remarkable  progress  depended  was  larger  at  the  end 
of  the  period  than  at  its  beginning. 

Almost  as  interesting  a  situation  of  quite  a  different  character  has 
developed  in  the  Pacific  Selling  Area.  The  rate  of  increase  in  popu- 
lation in  that  area  has  been  remarkable,  much  more  rapid  than  the 
rate  of  increase  in  its  flour  output.  This  indicates,  of  course,  that 
with  a  continuation  of  exactly  the  same  conditions  this  area  would 
in  time  become  a  buyer  of  flour  instead  of  a  seller.  But  its  popula- 
tion is  so  small  that,  even  with  the  rapid  increase,  it  included  only 
1.5  per  cent  more  of  the  country's  flour  consumers  in  1919  than  in 
1899.  On  the  other  hand,  its  proportion  of  total  flour  output  had 
increased  3.4  per  cent.  This,  as  already  noted  on  page  23,  indicated 
a  considerable  increase  in  its  shipments  to  other  States  and  to  foreign 
countries.  The  wheat  figures  make  it  evident,  however,  that  the 
importance  of  the  area  in  outside  markets  can  not  be  permanent 
without  some  change  in  the  indicated  tendency  of  wheat  farming. 

The  degree  of  dependence  of  the  two  buying  areas  on  other  States 
for  their  flour  supplies  is  clearly  indicated  by  Table  12.  Twenty- 
seven  per  cent  of  the  entire  population  of  the  coimtry  was  located  in 
the  Eastern  Buying  Area  in  1899,  and  the  table  shows  that  the  ten- 
dency to  concentration  in  that  territory  still  continues.  Neverthe- 
less, its  mills  made  only  11.1  per  cent  of  the  total  flour  output  at  the 
beginning  of  the  period  and  their  production  had  fallen  to  9.8  per 
cent  at  its  end.  The  relative  smallness  and  decreasing  importance 
of  its  wheat  crop  is  even  more  striking. 


32 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


The  degree  of  dependence  shown  in  the  Southern  Buying  Area  is 
greater  than  that  in  the  East.  In  1899  its  proportion  of  the  total 
population  was  six  times  as  large  as  its  proportion  of  the  total  wheat 
crop,  and  nearly  four  times  as  large  as  its  proportion  of  the  flour 
output.  During  the  20  years  covered  by  Table  12  the  situation  in 
regard  to  wheat  improved  shghtly,  but  flour  output  was  relatively 
smaller  in  1919  than  in  1899. 

In  commenting  on  the  Central  Neutral  Area,  it  is  important  to 
note  that  the  war  appears  to  have  stimulated  wheat  production 
more  in  this  area  than  in  any  other.  Its  crop  had  fallen  from  30 
per  cent  of  the  total  in  1899  to  20.2  per  cent  in  191 4,2*  but  increased 
from  that  figure  to  27.8  per  cent  in  1919.  As  was  to  have  been 
expected  from  the  greater  ease  of  expanding  agricultural  than 
manufacturing  operations,  flour  output  did  not  show  the  same 
response  to  increased  demand.  On  the  contrary,  it  continued  on  the 
down-grade  characteristic  of  both  products  from  1899  to  1914. 
Furthermore,  the  fact  that  flour  made  from  the  wheat  produced  in 
this  area  can  be  sold  only  at  a  much  lower  price  than  hard  wheat 
flours  undoubtedly  discouraged  any  considerable  increase  in  its 
production.  It  appears  probable,  therefore,  that  the  flour  figures  for 
1919  are  much  more  reliable  as  an  index  to  the  future  situation  in 
this  area  than  the  wheat  figures. 

Table  12  only  emphasizes  the  well-known  fact  that  the  great 
agricultural  States  of  the  upper  Mississippi  Valley  have  not  been 
increasing  in  population  as  fast  as  other  sections  of  the  country  for 
many  years,  by  showing  a  decrease  in  the  Central  Neutral  Area's 
proportion  of  the  total  population  from  24.5  to  21.8  per  cent.  But 
the  fact  that  this  area  is  probably  buying  more  flour  than  it  sells 
in  outside  territory  is  surprising.  In  1899  its  relative  importance 
as  a  flour  consumer  was  24.5  per  cent,  considerably  less  than  its 
proportion  of  the  total  flour  output,  which  was  30.4  per  cent.  The 
latter  figure  affords  a  striking  contrast  to  23.2  per  cent  for  the 
Northwest  and  only  12.9  per  cent  for  the  Southwest.  In  20  3^ears, 
however,  its  proportion  of  flour  output  decreased  12.5  per  cent, 
while  that  of  the  other  two  together  increased  12.7  per  cent.  These 
figures  present  clearly,  and  probably  with  as  much  exactness  as 
possible,  the  steady  advance  of  the  change  from  soft  to  hard  wheat 
flour  which,  only  fairly  started  in  1880,  made  very  rapid  progress  in 
the  next  20  years. 

The  Southeastern  Neutral  Area  has  never  been  of  special  impor- 
tance in  the  commercial  flour  market,  and  that  it  should  have  been 
considerably  less  important  in  1919  than  20  years  before  is  a  matter 
of  no  surprise. 

•  See  Exhibit  m. 


,>V 


GENERAL  SURVEY. 


33 


Concentration  in  the  milling  industry. — ^The  increase  of 
flour  milling  in  the  wheat-growing  States,  just  discussed,  has  been 
accompanied  by  a  concentration  of  the  industry  in  certain  favorably 
located  cities,  the  growth  of  several  powerful  milling  concerns,  and 
an  increase  in  the  number  of  large  mills. 

Minneapolis,  in  the  Northwest,  Buffalo,  on  the  water  route  to  world 
markets,  and  Kansas  City,  in  the  Southwest,  are  the  most  important 
wheat-flour  milling  centers  of  the  United  States.  Statistics  of  the 
trade  ^^  indicate  that  half  the  net  increase  in  flour  output  from 
1899  to  1914  was  probably  made  in  these  three  cities  alone. 

In  spite  of  the  increasing  concentration  in  the  ownership  of  the 
large  mills  referred  to  above,  flour  milling  may  still  be  classed  among 
industries  in  which  a  large  part  of  the  output  is  produced  by  relatively 
small  concerns  each  operating  a  single  plant.  Nevertheless,  the  pro- 
portion of  the  total  business  done  by  a  limited  number  of  large 
companies  is  very  considerable.  This  condition  is  most  in  evidence 
in  years  when  failure  of  local  wheat  supply  stops  many  of  the  small 
mills.  It  is  probable  that  in  such  years  over  half  the  flour  con- 
sumed in  the  United  States  is  made  by  100  concerns,  65  per  cent 
by  200,  and  80  per  cent  by  400. 

In  1914  the  total  output  of  the  218  largest  mills  (more  than  one 
owned  by  a  single  company  in  several  instances)  was  over  60  per 
cent  of  the  total  output  of  the  country.  The  average  output  of  these 
establishments  was  329,000  barrels  each.  The  average  output  of 
all  other  mills  was  less  than  10,000  barrels  each. 

The  218  mills  just  referred  to  each  made  100,000  barrels  or  over 
in  1914.  A  classification  of  mills  by  barrels  of  wheat  flour  pro- 
duced was  first  made  bv  the  Bureau  of  the  Census  for  1899.  Cus- 
tom  mills  were  included  in  the  classification  in  that  year  but  have 
been  excluded  since.  These  mills,  however,  are  all  quite  small. 
The  classification  for  1899  has,  for  that  reason,  been  accepted  as 
including  none  but  merchant  mills  in  the  classes  making  5,000 
barrels  or  more.  On  this  basis  the  figures  show  an  increase  in 
merchant  mills  making  100,000  barrels  or  more  from  135  in  1899 
to  218  in  1914.  In  1899,  2,584  mills  were  grinding  from  5,000  to 
20,000  barrels  each.  In  1914  there  were  only  1,377  mills  in  that 
class. 

The  figures  given  above  show  that,  under  conditions  prevailing 
in  the  flour  business  for  20  years  past,  mills  of  large  size  are  rapidly 
driving  out  their  smaller  competitors.  In  its  bulletin  on  flour- 
mill  and  gristmill  products  in  1914  the  Bureau  of  the  Census  classi- 
fies merchant  millH  in  32  States  according  to  output  in  1904,  1909, 
and  1914.    That  classification  has  been  used  in  the  following  table 

3«  The  Miller's  Mmaiwck,  published  by  the  Northwestern  Miller,  1918-19. 
183256°— 20 3 


""^t^H^PSflK^Z 


34 


COMMERCIAL.  WHEAT-FLOUR   MILLING. 


to  show  SO  far  as  possible  the  class  of  commercial  mills  (those  mak- 
ing a  thousand  barrels  or  over  annually)  operating  in  the  different 
areas  outlined  on  Map  II. 

Table  13. — Classijication  of  commercial  flour  mills  according  to  oiUput  and  location, 

1904,  1909,  and  1914. 


Cen- 
sus 
year. 

All  classes. 

1,000  but  less 

than  5,000 

barrels. 

5,000  but  less 

than  20.000 

barrels. 

21,000  but  less 

than  100,000 

barrels. 

100,000 

barrels 

or  more. 

Num- 
ber. 

Per 
cent. 

Num- 
ber. 

Per 
cent. 

Num- 
ber. 

Per 
cent. 

Num- 
ber. 

Per 
cent. 

Num- 
ber. 

Per 
cent. 

United  States 

1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 
1904 
1909 
1914 

6,413 

5,621 

5,055 

384 

318 

289 

969 

863 

751 

176 

199 

162 

11,001 

»909 

»805 

»407 

«306 

«329 

2,1 '2 

1,800 

1,477 

1,041 

978 

1,002 

»293 

»2  8 

>240 

100.0 

100.0 

100.0 

6.0 

5.6 

6.7 

15.1 

15.4 

14.9 

2.7 

3.5 

3.2 

15.6 

16.2 

15.9 

6.4 

5.4 

6.5 

33.4 

32.0 

29.2 

16.2 

17.4 

19.8 

4.5 

4.5 

4.8 

3,502 

3,145 

2,920 

126 

109 

106 

444 

371 

331 

58 

79 

61 

681 

623 

559 

245 

188 

198 

1,117 

978 

844 

678 

664 

696 

153 

133 

125 

54.6 

56.0 

57.8 

1.9 

1.9 

2.1 

6.9 

6.6 

6.6 

.9 

1.4 

1.2 

10.6 

11.1 

11.1 

3.8 

3.3 

3.9 

17.4 

17.4 

16.7 

10.6 

11.8 

13.8 

2.3 

2.3 

2.5 

2,123 

1,733 

1,377 

160 

118 

91 

32S 

279 

214 

74 

75 

50 

246 

232 

180 

111 

78 

77 

798 

610 

445 

310 

261 

248 

96 

80 

72 

33.10 
30.83 
27.24 
2.49 
2.10 
1.80 
5.11 
4.96 
4.23 
1.15 
1.33 
.99 
3.84 
4.13 
3.56 
1.73 
1.39 
1.52 
12.44 
10.85 
8.80 
4.83 
4.64 
4.91 
1.50 
1.43 
1.42 

622 

550 

540 

61 

52 

49 

164 

158 

138 

36 

36 

40 

54 

40 

49 

42 

30 

42 

184 

165 

143 

42 

40 

45 

39 

29 

34 

9.69 

9.78 

10.68 

.95 

.93 

.97 

2.56 

2.81 

2.73 

.56 

.64 

.79 

.84 

.71 

.97 

.65 

.53 

.n 

2.87 
2.94 
2.83 
.65 
.71 
.89 
.60 
.52 
.68 

166 

193 

218 

37 

39 

43 

33 

55 

68 

8 

9 

11 

20 

14 

17 

9 

10 

12 

43 

47 

45 

11 

13 

13 

5 

6 

9 

2.58 
3.43 
4.31 
.58 
.69 
.85 
.51 
.98 
1.35 
.12 
.16 
.22 
.31 
.25 
.34 
.14 
.18 
.24 
.67 
.84 
.89 
.17 
.23 
.24 
.08 
.11 
.18 

Northwestern  Selling  Area. . 
Southwestern  Selling  Area. . 
Pacific  Selling  Area 

Eastern  Buying  Area 

Southern  Buying  Area 

Central  Neutral  Area 

Southeastern  Neutral  Area. 
Other  States 

» These  figures  do  not  incluie  mills  in  the  States  of  Massachusetts  ani  Connecticut. 
«  These  figures  do  not  include  mills  in  the  States  of  South  Carolina,  Mississippi,  and  Louisiana.    (See 
p.  25.) 
«  These  figures  include  mills  in  Massachusetts,  Coimecticut,  South  Carolina,  Mississippi,  and  Louisiana. 

The  table  shows  that  the  total  number  of  commercial  mills  in  the 
country  fell  from  6,413  in  1904  to  5,621  in  1909,  and  to  5,055  m  1914. 
This,  in  connection  with  the  increase  in  total  output,  involved  an 
increase  in  average  production  per  mill  from  about  16,000  '*  barrels 
in  1904,  to  18,697  in  1909,  and  22,886  in  1914;  an  increase  of  17  per 
cent  from  1904  to  1909,  and  22  per  cent  from  1909  to  1914. 

The  increase  in  average  production  per  mill  from  1904  to  1914  is 
apparently  due  to  the  greater  efficiency  of  the  very  large  mills.  The 
table  shows  that  those  producing  100,000  barrels  or  more  increased 
in  number  from  166  in  1904  to  218  in  1914;  that  is,  there  is  an  in- 
crease during  these  10  years  of  practically  one  mill  for  each  three 
mills  in  that  class  in  1004.  In  that  year  there  were  only  26  of  these 
mills  in  each  thousand  commercial  mills  in  the  entire  country;  in  1914 

«  The  number  of  barrels  given  for  1904  is  approximate.  Since  the  census  does  not  give  a  separate  state- 
ment of  output  for  mills  making  l.OOO  barrels  and  over  for  that  year,  it  has  been  estimated  by  assuming  that 
mills  making  less  than  1,000  barrels  had  the  same  output  per  mill  in  1901  as  in  1909,  and  by  deducting 
their  output  thus  obtained  from  the  output  of  merchant  mills  of  all  classes. 


GENERAL   SURVEY. 


35 


/ 


^'V 


their  number  had  increased  to  43  in  each  thousand.     Their  relative 
importance  had  increased  nearly  70  per  cent. 

During  the  same  10  years,  mills  having  an  output  of  20,000  to 
100,000  barrels  decreased  in  number  from  622  to  540.  These  figures 
leave  a  question  as  to  the  line  between  the  more  efficient  and  less 
efficient  mills.  Although  there  was  a  decrease  of  82  mills  in  this  class 
during  the  10  years,  it  is  not  clear  but  the  increase  in  the  number  of 
100,000-barrel  mills  may  have  been  in  considerable  part  made  up 
by  very  efficient  mills  in  the  next  lower  class  increasing  their  output 
during  the  10  years  up  to  100,000  barrels.  As  already  noted,  the 
entire  number  of  these  mills  decreased  from  622  to  540.  but  the 
number  per  thousand  commercial  mills  in  the  country  increased  from 
97  in  1904  to  107  in  1914;  that  is,  their  relative  importance  was 


increasing. 


The  table  apparently  makes  it  clear  that  conditions  were  decidedly 
unfavorable  to  the  class  of  mills  making  from  5,000  to  20,000  barrels 
of  flour  annually.  Their  number  decreased  from  2,123  in  1904  to 
1,377  in  1914.  In  other  words,  there  were  less  than  two  of  these 
mills  in  the  latter  year  where  there  had  been  three  in  the  former. 
In  1904,  of  each  thousand  commercial  mills,  331  were  in  this  class; 
in  1914,  only  272. 

Conditions  appear  to  have  been  more  favorable  to  mills  making 
from  1,000  to  5,000  barrels  annually.     The  table  shows  that  their 
number  decreased  from  3,502  to  2,920,  but  that  their  number  per  J 
thousand  commercial  mills  increased  from  5 16  to  578. 

Table  13  shows  that  mills  of  the  largest  size  did  not  increase  in 
number  nearly  so  fast  in  the  Northwestern  Selling  Area  as  in  the 
Southwest.     This  was  to  be  expected,  not  only  because  the  rate  of 
increase  in  flour  output  in  the  latter  area  from  1904  to  1914  was  higher 
than  in  the  former,  but  a^so  because  in  1904  this  class  of  mills  already 
constituted  nearly  10  per  cent  of  the  commercial  mills  in  the  North- 
west, while  in  the  Southwest  they  were  still  less  than  4  per  cent  of  the 
total.     Nevertheless,  the  percentage  figures  for  the  Northwest  show 
an  increase  of  about  50  per  cent  in  the  relative  importance  of  this 
class  of  mills,  while  there  was  practically  no  change  for  the  next 
lower  class  and  a  decHne  of  approximately  25  per  cent  for  mills  mak- 
ing from  5,000  to  20,000  barrels.     The  smallest  mills  classed  as  com-^ 
mercial  in  this  report,  those  making  from  1,000  to  5,000  barrels,  j 
fared  as  well  or  better  here  than  in  the  entire  country,  apparently  J 
increasing  in  relative  importance  about  10  per  cent. 

The  highest  increase  in  relative  importance  shown  for  any  group 
of  mills  by  Table  13  is  that  of  the  100,000-barrei  class  located  in  the 
Southwest.  The  increase  in  their  percentage  figure  from  0.51  to  1.35 
indicates  a  growth  relative  to  the  entire  output  of  the  country  of 
considerably  over  150  per  cent     It  is  possible,  furthermore,  that  the 


k^tti 


36 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


20,000  to  100,000  barrel  mills  in  the  area  would  also  be  shown  to  have 
been  decidedly  prosperous  if  account  could  be  taken  of  mills  that 
passed  from  this  class  to  the  100,000-barrel  class  during  the  10  years. 
In  this  area,  contrary  to  the  general  rule,  the  smallest  mills,  as  well 
as  those  next  larger,  decreased  in  relative  importance. 

In  the  Pacific  Selling  Area  the  100,000-barrel  mills  increased  in 
number  from  8  to  11,  their  relative  importance  in  1904  and  1914 
being  expressed  by  0.12  and  0.22.  While  this  area  did  not  show  so 
rapid  an  increase  in  the  largest  mills  as  the  Southwest,  it  did  show 
an  increase  in  the  next  lower  class  from  36  to  40  mills.  a\n  increase 
in  the  number  of  mills  in  this  class  is  found  nowhere  else  except  in  the 
Southeastern  Neutral  Area.  The  change  in  mills  of  the  5,000  to 
20,000  barrel  class  was  similar  to  those  in  the  two  other  selling  areas. 
But  in  the  smallest  size  mills  there  recurs  the  peculiarity,  again  shared 
by  the  same  group  in  the  Southeastern  Neutral  Area,  of  an  increase 
in  numbers,  accompanied,  of  course,  by  a  very  considerable  increase 
in  relative  importance.  It  appears  probable  that,  as  the  above  situa- 
tion suggests,  the  competition  of  the  great  commercial  mills  has  had 
less  influence  in  these  areas  than  in  other  parts  of  the  country. 

The  data  prepared  by  the  Census  Bureau  on  the  classification  of 
merchant  flour  mills  according  to  output  include  Massachusetts, 
Rhode  Island,  and  Connecticut  in  ''Other  States."  It  has,  therefore, 
been  necessary  in  this  table  to  present  data  for  the  Eastern  Buying 
Area  exclusive  of  these  States.  In  this  area,  which  produces  less 
than  one-half  the  flour  it  consumes,  the  table  shows  a  condition  of 
things  quite  different  from  that  which  prevailed  in  the  selling  areas. 
For  example,  it  shows  that  the  100,000-barrel  class  decreased  in 
number  from  20  to  17  mills,  their  relative  importance  to  all  mills 
in  the  four  classes  showing  no  appreciable  change.  The  20,000  to 
100,000  barrel  mills  held  their  own  very  well,  the  decrease  being 
only  from  54  to  49  miUs.  Nor  is  the  change  in  the  other  two  classes 
of  any  considerable  importance.  In  other  words,  as  might  be 
expected  from  the  fact  that  there  has  been  no  considerable  change 
in  the  flour  output  of  the  area,  we  find  no  marked  change  in  the 
classification  of  its  miUs.  It  should  be  remembered,  however,  that 
the  average  production  of  the  mills  left  in  this  area  was  considerably 
more  in  1914  than  in  1904. 

Because  the  census  data  include  the  data  for  South  Carolina, 
Florida,  Alabama,  and  Louisiana  in  ''Other  States,"  it  has  been 
necessary  to  exclude  those  States  from  the  Southern  Buying  Area 
in  this  tabulation.  The  mills  in  this  area,  for  which  the  census 
does  give  data,  show  relatively  small  changes  in  classification. 
There  were  three  more  mills  of  the  100,000-barrel  class  in  1914  than 
in  1904.  This  is  due  to  the  fact  that  at  certain  places  it  has  been 
possible  to  develop  a  satisfactory  lai^e  milling  business,  although 


GENERAL  SURVEY. 


37 


in  the  20  years  the  flour  output  of  this  entire  area,  including  the  States 
left  out  in  this  table,  increased  only  from  5.3  to  5.9  million  barrels. 
The  table  shows. that  mills  of  the  20,000  to  100,000  barrel  class 
maintained  their  number  while  there  was  a  decrease  in  the  number 
of  mills  in  the  next  lower  class  from  111  to  77,  their  relative  impor- 
tance showed  no  such  falling  off  as  is  shown  in  some  other  areas. 
Also,  contrary  to  experience  in  other  areas,  the  smallest  mills  de- 
clined in  actual  number  more  than  5,000  to  20,000  barrel  miUs  and 
showed  no  increase  in  relative  importance. 

The  Central  Neutral  Area  has  more  mills  than  any  other  area 
covered  by  the  table.  In  1904  it  had  a  third  of  all  commercial 
miUs,  but  during  the  10  years  their  number  decreased  from  2,142 
to  1,477,  and  in  1914  they  constituted  less  than  30  per  cent  of  the 
greatly  decreased  total.  Even  in  this  area  there  was  a  net  increase 
of  two  mills  in  the  100,000-barrel  class.  This  increase  in  the  most 
effective  class  of  mills  had  but  slight  effect  on  the 'total  production 
of  the  area,  which,  as  shown  on  page  27,  decreased  from  30.6  to  21.6 
miUion  barrels.  In  all  other  classes  the  reduction  in  number  was 
considerable;  from  184  to  143  in  the  20,000  to  100,000  barrel  class, 
from  798  to  445  in  the  5,000  to  20,000  barrel  class,  and  from  1,117 
to  844  in  the  1,000  to  5,000  barrel  class. 

The  flour-mill  industry  has  never  been  of  considerable  importance 
in  the  Southeastern  Neutral  Area,  and  such  miUs  as  are  found  there 
belong  more  generally  to  the  neighborhood  class  than  to  the  large 
commercial  class.  As  a  consequence,  although  this  area  produced 
less  than  9  per  cent  of  the  country^s  total  flour  output  in  1914,  its 
commercial  mills  amounted  to  19.8  per  cent  of  the  total.  Neverthe- 
less, the  apparent  necessity  for  larger  mills  in  order  to  compete  to 
better  advantage  with  the  great  western  flour  manufacturers  has 
increased  the  number  of  mLUs  in  the  100,000-barrel  class  from  11 
to  13  and  in  the  20,000  to  100,000  barrel  class  from  42  to  45,  while 
in  the  5,000  to  20,000  barrel  class  the  number  decreased  from  310 
to  248.  In  this  area  the  1,000  to  5,000  barrel  mills  have,  as  already 
noted,  escaped  to  some  extent  the  effects  of  competition  from  the 
greater  miUs  of  the  West.  As  a  consequence  their  number  has  in- 
creased from  678  to  696  and  their  relative  importance  from  10.6  per 
cent  of  all  mLQs  covered  by  the  table  to  13.8  per  cent.  It  is  inter- 
esting to  note  that  the  net  increase  of  3.2  per  cent  in  the  relative 
importance  of  all  mills  in  this  class  is  exactly  accounted  for  by  the 
same  increase  in  this  one  area. 

In  the  remaining  States  there  were  only  293  mills  in  1904,  and  in 
1914  their  nimiber  had  decreased  to  240.  Even  in  this  area,  where 
the  flour-milling  industry  is  so  unimportant,  the  number  of  100,000- 
barrel  miUs  increased  from  5  to  9,  while  in  aU  other  classes  there  were 


38 


COMMERriAI.   WHEAT-FLOI^R    MILLING 


decreases  ranging  from  5  in  the  next  to  the  largest  class  to  24  in  the 
5,000  to  20,000  barrel  class. 

Concentration  and  competition. ^It  is  not  feasible  in  this  report  to 
do  more  than  refer  to  some  of  the  other  factors  besides  location  of 
the  wheat  fields  that  have  entered  into  the  steadily  increasing  con- 
centration of  flour  milling  described  above.  The  growth  of  great 
commercial  and  industrial  centers  has  compelled  the  development  of 
the  commercial  mill— the  mill  that  ships  flour  into  these  centers. 
The  commercial  mill  does  not  thrive  unless  it  sells  a  standardized 
flour,  and  no  mill  can  produce  a  standard  flour,  uniform  year  after 
year,  unless  it  is  able  to  draw  wheat  of  the  required  quality  from  a 
distance  when  necessary. 

In  spite,  however,  of  the  many  factors  tending  to  concentration 
there  is  no  approach  toward  monopolistic  control  of  the  flour  indus- 
try by  any  one  concern.  An  attempt  to  form  a  great  flour  trust  in 
1899  resulted  in  a  complete  failure.  Later  efforts  to  bring  together 
the  great  Washburn  and  Pillsbury  interest  were  unsuccessful.  This 
does  not  mean,  however,  that  big  aggregations  of  capital  are  not 
meeting  with  success  in  the  flour  business.  The  measure  of  success 
is  indicated  by  the  pubhshed  reports  of  such  concerns. 

The  Washburn-Crosby  Co.  is  a  corporation  organized  in  1889  to 
take  over  a  milling  business  that  had  grown  to  large  proportions  in 
Minneapolis  as  a  private  enterprise.  The  mills  now  operated  by  the 
company  have  a  capacity  of  about  60,000  barrels  per  day.  Operated 
to  full  capacity  they  could  apparently  produce  a  sixth  of  all  the  flour 
consumed  in  the  United  States. 

The  Pillsbury  Flour  Mills  Co.  also  carries  on  a  business  organized 
and  successfully  developed  through  many  years  of  operation.  Pub- 
lished figures  indicate  that  its  capacity  is  over  half  that  of  the  Wash- 
burn-Crosby concern. 

The  Standard  Milling  Co.  differs  from  the  two  already  mentioned 
in  that  it  does  not  have  behind  it  years  of  successful  development 
under  individual  ownership.  It  is  a  combination  of  a  number  of 
good-sized  mills  located  in  widely  separated  sections  of  the  country. 
Organized  in  1900,  it  paid  no  dividends  on  its  common  stock  until 
1912.  Its  published  statements,  however,  report  an  increase  in  its 
surplus  frona  $1,317,181,  in  1904  to  $4,060,506  in  1917.  Its  com- 
bined  capacity  is  considerably  over  30,000  barrels  per  day. 

The  Kansas  Flour  Mills  Co.  is  said  to  have  a  capacity  of  about 
15,000  barrels  per  day,  and  there  are  a  number  of  other  companies 
whose  capacity  approaches  or  exceeds  10,000  barrels.*^ 

Apparently  there  are  10  milling  companies  which  could  under  pres- 
sure produce  half  the  flour  made  in  the  United  States  in  an  ordinary 
year.     But  in  no  case  does  actual  output  make  any  near  approach  to 

«  "Flour  Mills,"  published  by  the  Northwestern  Miller,  is  the  authority  used  as  to  the  capadty~o7^ 


GENERAL  SURVEY. 


39 


capacity.  The  estimated  capacity  of  the  country's  flour  mills  is 
approximately  two  and  one-half  times  the  largest  production  in  any 
year.  This  surplus  capacity,  which  is  characteristic  of  small  con- 
cerns, is  undoubtedly  an  important  obstacle  in  the  way  of  the  many 
factors  working  toward  concentration  and  possible  monopolistic 
control  of  the  industry. 

Competitive  methods. — In  its  preliminary  report  on  flour  milling 
and  jobbing  of  April  4,  1918,  the  Commission  commented  on  market- 
ing conditions  and  practices  as  follows: 

The  rommission's  investigation  disclosed  that  competitive  conditions  in  the  in- 
dustry had  develoj)ed  some  marketing  practices  on  the  part  of  millers  which  were  o|>en 
to  criticism,  but  none  that  were  particularly  vicious.  Such  practices  as  did  exist 
have  been  largely  done  away  with  for  the  duration  of  the  war  by  the  regulations  of 
the  United  States  Food  Administration. 

•  **«**• 

One  of  the  worst  evils  of  the  floiu*  business  is  the  multiplication  of  brands,  many 
of  which  are  not  identified  by  the  name  of  any  concern.  Heavily  advertised  brands 
usually  bear  the  name  of  the  manufacturer  or  the  distributor,  but  there  are  a  large 
number  of  brands  sold  i  hat  bear  no  name  to  which  responsibility  for  poor  quality  can 
be  attached.    It  is  on  such  brands  that  price  cutting  is  apt  to  be  most  objectionable. 

The  pure-food  law  requires  the  correct  weight  to  be  put  on  the  sack,  but  does  not 
require  the  name  of  the  manufacturer  or  distributor.  It  would  undoubtedly  make 
for  much  better  marketing  conditions  in  the  industry  if  such  identiLcation  of  all  flour 
sold  were  required. 

The  worst  practice  found  among  distributors  was  that  of  contracting  ahead  for  as 
large  a  quantity  of  flour  as  the  mills  would  sell,  with  the  intention  of  calling  for  deliv- 
eries if  the  price  went  up  but  of  repudiating  their  obligations  if  the  price  went  down. 
This  practice  was  almost  entirely  confined  to  more  or  less  irresponsible  concerns 
attracted  into  the  business  by  the  prospects  of  large  profits.  It  has  been  effectually 
prevented  for  the  duration  of  the  war  by  ihe  regulations  of  the  Food  Administration, 
which  forbid  mills  to  sell  flour  more  than  30  days  ahead  of  aciual  delivery. 

After  the  issue  of  the  report  above  referred  to,  and  for  a  period 
extending  beyond  that  covere  1  by  the  present  report,  the  flour-mill- 
ing industry  went  so  completely  under  the  control  of  the  Food  Admin- 
istration both  as  to  profits  and  methods  of  doing  business  that  it  did 
not  seem  necessary  for  this  Commission  to  make  further  inquiry  in 
this  direction. 

Section  5.  Millers'  Associations. 

The  Commission  has  made  no  investigation  of  the  organization 
and  practices  of  associations  in  the  flour-miQing  industry.  There 
are,  however,  certain  facts,  commonly  known  to  the  trade,  which 
are  worth  noting  in  this  report.  Associations  have  been  organized 
in  at  least  18  different  States.  (See  Exhibit  IV.)  Most  of  these 
associations  cooperate  in  interstate  or  international  work  through 
the  Millers'  National  Federation.  Various  other  group  or  sectional 
associations  are  noted  below  with  brief  mention  of  the  character  of 
their  activities.  The  flour  trade  also  has  local  clubs  in  active  opera- 
tion in  a  number  of  the  larger  cities. 


40 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


GENERAL   SURVEY. 


41 


Millers'  National  Fei>eration.— The  proceedings  of  the  17th 
annual  meeting  of  the  Millers'  National  Federation,  held  in  Chicago, 
April  11,  1919,  indicate  the  character  of  the  activities  of  the  federa- 
tion. Plans  for  the  operation  of  the  mills  of  the  country  under  the 
Wheat  Director's  administration  of  the  wheat  price  guaranty  law 
was  the  principal  topic  discussed  by  the  convention.  The  fact  that 
the  report  of  the  special  legislative  committee  on  this  subject  was 
presented  by  the  former  head  of  the  milling  division  of  the  Food 
Administration  is  in  itself  significant  of  the  federation's  influence 
on  matters  that  were  of  vital  importance  not  only  to  the  millers  of 
the  United  States  but  also  in  their  effect  on  the  food  supply  of  the 
country  during  the  war.  Other  members  of  this  special  legislative 
committee  were  divisional  chairmen  of  the  milling  division. 

It  was  reported  to  the  convention  that  the  audit  of  millers'  accounts 
was  taken  up  with  the  Enforcement  Division  of  the  Food  Adminis- 
tration soon  after  the  armistice  was  declared,  and  that  an  agree- 
ment was  reached  in  January,  1919.  On  cancellation  of  the  Food 
Administration  regulation  of  contracts,  December  23,  1918,  the 
federation  requested  its  members  to  continue  to  observe  the  same 
rules  until  the  committee  on  these  subjects  could  act. 

The  secretary  reported  to  the  convention  that  it  was  believed  that 
the  committee  regulations  based  on  those  of  the  Food  Administration 
and  issued  early  in  1919  had  been  quite  generaUy  observed.  Con- 
siderable work  had  been  done  on  export  trade  conditions,  especiaUy 
work  relating  to  Cuban  restrictions  on  imports  of  flour  from  the 
United  States,  and  to  improved  port  facihties  for  handUng  flour.  In 
addition  to  the  above  activities,  other  committees  appeared  to  be 
continuing  assignments  including  Federal  and  State  legislation, 
transportation  conditions,  and  grain  standardization  and  inspection. 

Information  in  regard  to  the  officers  and  conunittees  of  the  federa- 
tion is  given  in  Exhibit  IV. 

Community  Millers'  Association  of  America.— Mills  of  300- 
barrel  capacity  and  under  have  recently  organized  the  Community 
Millers'  Association  of  America.  In  their  address  to  the  Wheat 
Director,  adopted  at  their  annual  meeting  in  May,  1919,  they  claimed 
that  their  association  was  "the  only  representative  body  of  the  small 
millers  in  this  country."  The  ambitious  character  of  this  new  asso- 
ciation's activities  is  indicated  by  the  following  list  of  projects  under- 
taken at  this  meeting: 

1.  Presentation  of  wheat  g:uaranty  administration  plan  to  Mr.  Barnes  (the  Wheat 

Director). 

2.  Insistence  on  representation  of  the  smaller  mills  before  Mr.  Barnes  on  the  same 

numerical  basis  as  the  large  mills. 

3.  Attack  on  the  milling  in  transit  system. 

4.  Advocacy  of  Federal  credit  to  conmiunity  millers. 

5.  Organization  of  the  entire  body  of  small  millers,  estimated  to  include  11  out  of  12 

of  all  millers  in  the  country. 


4 


Those  who  have  been  most  active  in  establishing  this  new  assooia* 
tion  are  owners  of  self-contained  small  mills.  The  builders  of  such 
mills  have  also  done  much  to  get  the  association  well  started.  How- 
ever, owners  of  standard  type  mills  up  to  300-barrel  capacity  were 
well  represented  at  the  recent  convention.     (See  Exhibit  IV.) 

The  Millers'  Export  Association  (Inc.) — This  association  was 
incorporated  on  July  22,  1919,  for  the  purpose  of  promoting  trade  in 
American  wheat  flour  in  foreign  countries  and  improving  and  devel- 
oping facilities  for  the  handling  and  transportation  of  wheat  flour 
exports.  It  was  the  purpose  of  this  organization  to  act  as  agent  for 
its  members  in  dealing  with  the  United  States  Grain  Corporation 
and  governmental  flour-buying  agencies  of  other  countries.  The 
agreement  under  which  it  operated  was  canceled,  however,  as  of 
May  20,  1920.     (See  Exhibit  IV.) 

Other  Associations. — The  soft-wheat  millers  of  the  Ohio  Valley 
are  organized  in  separate  State  associations,  but  their  common  inter- 
est in  matters  such  as  the  margin  allowed  by  the  Food  Administra- 
tion for  converting  wheat  to  flour  brings  them  into  joint  convention 
occasionally. 

Southwestern  millers  also  have  their  own  peculiar  problems  which 
are  divided  between  the  Southwestern  Millers'  League,  which  has  a 
very  large  membership  among  southwestern  millers,  and  the  Millers' 
Exchange  located  at  Kansas  City.  Maintenance  of  the  existing  parity 
of  freight  rates  and  traffic  regulations  between  different  sections 
appears  to  be  the  special  task  of  the  former;  mutual  insurance  of 
sales  contracts  is  undertaken  by  the  latter.  The  league  also  distrib- 
utes information  on  State  legislation  and  represents  its  members 
before  various  public  bodies.  The  exchange,  besides  its  contract 
insurance  business,  distributes  a-  compilation  of  sales  data,  including 
prices  which  are  reported  by  its  members  who  are  located  principally 
in  Kansas,  Oklahoma,  Missouri,  and  Nebraska.     (See  Exhibit  IV.) 

The  distribution  of  details  of  actual  sales  reported  by  their  difl*erent 
members  also  appears  to  be  an  important  feature  of  the  work  of 
leading  State  associations,  as  for  example,  Ohio  and  Indiana. 

Association  work  on  the  Pacific  slope  is  divided  between  the  North 
Pacific  and  the  South  Pacific  Associations.     (See  Exhibit  IV.) 


•I 


Chapter  II. 
COSTS,  PRICES,  AND  PROFITS. 

Section  1.   Prices  of  wheat  flonr. 

The  tables  of  relative  prices  of  the  Bureau  of  Labor  Statistics  of 
the  United  States  Department  of  Labor  afford  interesting  compari- 
sons between  prices  of  wheat  flour  and  other  commodities.  Broadly 
they  mdicate  that  during  the  advance  in  prices  from  the  low  level 
of  the  nineties  there  has  been,  relatively,  a  larger  supply  of  food 
than  of  other  commodities.  Although  the  output  of  other  com- 
modities has  increased  more  rapidly  than  the  output  of  food,  demand 
for  those  commodities  has  apparently  increased  still  more  rapidly. 
Consequently,  with  a  single  exception  in  more  than  20  years,  the 
average  relative  wholesale  price  of  the  15  articles  of  food  included  in 
the  tables  of  the  Bureau  of  Labor  Statistics  has  each  year  shown 
less  advance  above  the  low  level  of  the  nineties  than  is  shown  by 
the  average  annual  price  of  all  commodities  covered  by  the  tables. 

Until  1915  flour  generally  shared  with  other  foods  this  tendency 
to  advance  m  price  less  rapidly  than  other  commodities.     Indeed,  the 
flour  prices  published  by  the  Bureau  of  Labor  Statistics,  both  whole- 
sale and  retail,  for  the  four  years  1911-1914  were  relatively  much 
lower  than  those  of  food  in  general.     Beginning  with  1915,  however, 
flour  prices  advanced  rapidly,  with  the  result  that  in  1918  its  relative 
wholesale  price  was  apparently  not  only  higher  than  the  relative 
average  wholesale  price  of  food,  but  also  higher  than  that  of  all  other 
commodities.     The  indicated   advance  in  relative  retail  prices  had 
apparently  not  yet  brought  that  for  flour  up  to  a  level  with  those  for 
other  foods  in  1919,  but  according  to  the  latest  available  figures,  in 
the  spring  of  1920  their  relative  advance  above  their  average  in  the 
nineties  would  have  equaled  that  for  foods  generaUy  if  the  prices  of 
sugar  and  potatoes  had  not  advanced  phenomenally. 

The  course  of  flour  prices  during  the  five  years  covered  by  this 
report  is  of  such  interest  as  to  warrant  a  comparison  of  the  changes 
from  year  to  year,  not  only  for  flour  but  also  for  wheat.  The  fol- 
lowing table  shows  retail,  export,  and  wholesale  prices  of  wheat  flour 
per  barrel  for  the  mill  years  1913-14  to  1917-18,  inclusive;  the  average 
receipts  per  barrel  for  flour  sold  by  37  large  commercial  milling  com- 
panies (see  p.  57),  their  receipts  for  feed  per  barrel  of  flour  sold,  and 
the  cost  of  the  wheat  they  used  in  making  a  barrel  of  flour;  the' esti- 
mated receipts  by  farmers  throughout  the  United  States  for'the  same 
quantity  of  wheat  and  also  their  average  receipts  per  bushel 
42 


i 


^ 


COSTS,   PRICES,   AND  PROFITS. 


43 


Table  U.— Retail,  export,  and  wholesale  prices  of  wheat  Jlour,  millers'  receipts  for  flour 
and  feed,  millers'  cost  of  wheat,  and  farmers'  receipts  for  wheat,  per  unit  figures,  191S-U 

10  J"l  7~lo t 


Retail  price  per  barrel  • /dollars. . . 

„  .  1  per  cent.. 

Export  pnce  per  barrel  ^ /dollars. . . 

„^  ,      .  ipercent.. 

Wholesale  pnce  per  barrel « /dollars. . . 

»«..      .        .   .   .     „  Ipercent.. 

Millers'  receipts  for  flour  per  barrel » /dollars . . . 

iDcr  cent 

Millers'  receipts  for  feed  per  barrel  * /dollars . .'  .* 

-_,„      .  ipercent.. 

Millers'  receipts  for  flour  and  feed  per  barrel  ./dollars . . . 

,,.„      .  .  ipercent.. 

Millers'  cost  of  wheat  per  barrel /dollars . . . 

iDcr  cent 
Farmers'  receipts  for  wheat  per  barrel  s /dollars. . ! 

Farmers'  receipts  per  bushel  • /dollars . . . 

\per  cent. . 

Lidexnumber 


Mill  or  fiscal  year. 


1913-14 


5.76 
100 

4.61 
100 

4.22 
100 

4.15 
100 
.77 
100 

4.92 
100 

3.96 
100 

3.50 
100 
.79 
100 

100 


1914-15 


7.41 
129 

5.86 
127 

6.02 
143 

5.55 
134 
.84 
109 

6.39 
130 

5.42 
137 

4.47 
128 
.99 
125 

131 


1915-16 


7.20 
125 

5.63 
122 

5.61 
133 

5.25 
127 
.77 
100 

6.02 
122 

5.09 
129 

4.45 
127 
.98 
124 

125 


191&-17 


10.92 

190 
7.80 

160 
9.98 

237 
8.5.5 

206 
1.26 

164 
9.81 

199 
8.32 

210 
6.62 

189 
1.44 

182 

198 


1917-18 


12.54 

218 
11.19 

243 
10.53 

250 
10.22 

246 
1.30 

169 
11.52 

234 
9.72 

246 
9.10 

260 
2.05 

260 

2W 


»  Data  from  Bureau  of  Labor  Statistics  of  the  Department  of  Labor. 
'Statistical  Abstract  of  the  United  States,  1918,  p.  575. 

»Averac:e  receipts  per  barrel  received  by  37  large  commercial  milhng  companies 
coiilSi^  amount  received  from  sales  of  feed  per  barrel  of  flour  sold  by  37  large  commercial  milHnf 

6  Average  receipts  per  bushel  multipUed  by  the  number  of  bushels  used  per  barrel  of  flour  bv  37iftri!« 
commercial  milling  compames.  '      *»f6« 

•  Monthly  Crop  Report,  Department  of  Agriculture,  October,  1918,  p.  127. 

Any  comparison  of  the  course  of  flour  prices  during  the  period 
covered  by  the  above  table  must  rest  primarily  on  the  relation  of 
flour  prices  in  1913-14  to  prices  of  other  commodities  and  to  former 
prices  of  flour.  It  has  already  been  noted  that  during  the  four-year 
period,  1911-1914,  prices  of  flour  were  much  below  the  general  level  of 
prices.  The  fact  that  in  1913-14  they  were  still  at  a  low  point  is 
emphasized  by  noting  that  while  the  millers'  receipts  for  flour  per 
barrel  shown  in  the  table  is  only  $4.15,  the  average  mill  value  of  flour 
produced  in  1889,  according  to  the  reports  of  the  Bureau  of  the 
Census,  was  $4.33.  This  comparison  alone,  however,  might  lead  to 
misapprehension  if  accoimt  is  not  taken  of  the  fact  that  during  the 
low-price  decade  of  the  nineties  flour  prices  declined  more  rela- 
tively than  other  prices  and  their  decline  continued  throughout  a 
longer  period,  with  the  consequence  that  the  average  mill  value  of 
flour  made  in  1899,  according  to  the  Census,  was  only  $3.35.  Rec- 
ognition of  the  relatively  low  price  of  flour  in  1913-14  renders  the 
considerable  increase  from  that  year  to  1917-18  less  striking  than  it 
would  be  if  flour  prices  of  the  first  year  of  the  period  were  relatively 
as  high  as  prices  of  other  commodities. 

In  order  to  get  a  broad  view  of  the  changes  in  the  closely  related 
group  of  prices  in  Table  14,  mdex  numbers  have  been  computed  by 
adding  together  the  prices  shown  for  each  year  and  dividing  the 
totals  for  the  last  four  years  by  the  total  for  1913-14.     These  index 


I/T 


"^•r3&i«-«-. . 


44 


COMMERCTAI.   WHEAT-FLOUR    MILLING. 


numbers  indicate  a  general  advance  of  139  per  cent  for  the  related 
prices  in  the  group  covered  by  Table  14  during  the  five  years  from 
1913-14  to  1917-18.  The  advance  of  31  per  cent  in  the  second  year 
of  the  period  was,  of  com^e,  due  to  a  sudden  increase  in  demand 
following  the  opening  of  the  European  war  in  the  summer  of  1914. 
Events  proved  that  under  ordinary  conditions  of  ocean  transporta- 
tion there  would  be  an  abundant  supply  of  wheat  and  floiu*  for  the 
warring  nations  of  Europe.  This  is  indicated  by  the  fall  in  the  index 
numbers  of  Table  14  from  131  during  the  first  year  of  the  war  to  125 
dm-ing  the  second  year.  The  result  of  the  above  conditions  is  that 
during  the  first  two  years  of  the  war  prices  of  flour  and  wheat  show 
a  relatively  small  advance  compared  to  those  of  the  last  two  years 
covered  by  the  table. 

The  year  1916-17  opened  with  prices  still  at  a  relatively  low  level. 
Eiu-opean  Governments,  however,  all  recognized  the  fact  that  there 
would  probably  soon  develop  conditions  in  ocean  transportation 
which  would  limit  their  practically  available  sources  of  wheat  flour 
to  the  American  continents  and,  in  a  considerable  degree,  to  North 
America.  Largely  due  to  their  provision  for  this  emergency  by  con- 
tracts for  wheat  and  flour  for  future  delivery  a  scarcity  of  cash  wheat 
developed  which  resulted  in  the  flour  and  wheat  panic  of  the  spring 
of  1917.  The.  effects  of  this  panic  are  shown  in  the  increase  in  the 
averageretail  price  of  flom*  from  $7.20  in  1915-16  to  $10.92  in  1916-17 
and  in  the  index  number  for  all  the  items  from  125  in  the  former  to 
198  in  the  latter  year. 

The  data  shown  in  the  table  for  1917-18  are  typical  of  conditions 
in  the  wheat  and  flour  market  of  the  United  States  under  Govern- 
ment regulations  dm-ing  the  war.  Although  the  index  number 
shows  an  increase  of  20  per  cent  over  the  preceding  year,  if  compari- 
sons were  made  with  prices  at  their  high  point  in  the  last  half  of 
1916-17,  a  decrease  would  be  shown  instead  of  an  advance. 

Table  14  shows  that  the  retail  price  of  flour  as  represented  by  the 
Minneapolis  and  Kansas  City  data  of  the  Bm-eau  of  Labor  Statistics 
advanced  from  $5.76  in  1913-14  to  $12.54  in  1917-18.  This  increase 
of  nearly  $7  in  the  price  is  indeed  striking,  but  comparison  with  the 
index  number  for  the  group  shows  that  the  retail  price  advanced 
only  118  per  cent  in  comparison  with  139  per  cent  for  the  group  as  a 
whole.  To  put  the  contrast  more  strongly,  the  advance  shown  for 
the  retail  price  of  flour  is  considerably  less  than  is  shown  for  any 
other  item  in  the  table  except  millers'  receipts  for  feed.  The  changes 
in  prices  at  retail  from  year  to  year  were  similar  to  those  indicated 
for  the  group  as  a  whole.  In  each  year  the  tendency  of  retail  prices 
to  lag  behind  wholesale  and  manufacturers'  prices  is  evident.  For 
example,  although  millers'  receipts  for  flour  were  34  per  cent  higher 
in  1914-15  than  in  the  preceding  year,  the  advance  m  the  retail  price 


< 


COSTS,  PRICES,   AND  PROFITS. 


45 


was  only  29  per  cent,  but  in  the  following  year  although  millers' 
receipts,  as  indicated  by  the  index  number,  went  down  from  134  to 
127,  the  retail  price  declined  only  from  129  to  125.  At  this  point 
it  showed  exactly  the  same  advance  from  the  1913-14  level  as  is 
shown  by  the  index  number  for  the  entire  group.     In  1916-17  it 

^  again  failed  to  keep  up  with  the  advance  in  other  prices,  although 

as  the  table  shows  its  index  number  for  that  year  is  only  8  points 
below  that  for  the  group  as  a  whole.  During  the  critical  war  year, 
1917-18,  the  retail  price  showed  no  such  advance  as  other  prices  in 

^  the  table.     This  is  indicated  by  an  increase  of  only  28  points  in  its 

index  number  in  comparison  with  an  increase  of  41  points  for  the 
group  as  a  whole,  and  of  78  points  in  farmers'  receipts  per  bushel  of 
wheat. 

^  According  to  Table  14  the  average  price  of  flour  exported  from  the 

United  States  advanced  from  $4.61  in  1913-14  to  $11.19  in  1917-18. 
Its  index  number  shows  an  increase  of  143  per  cent  or  4  points  in 
excess  of  the  index  number  for  the  group  as  a  whole.     It  is  interesting 

y  to  note  that  this  last  year  of  the  war,  when  the  attention  of  the 

Government  was  of  necessity  brought  to  bear  on  the  situation  in  the 
flour  market,  is  the  only  year  in  which  export  prices  show  as  great 
an  advance  as  the  group  as  a  whole.     In  the  years  1914-15  and 

>  1915-16  the  differences  between  the  increase  in  export  prices  and 
average  prices  for  the  other  items  was  not  particularly  notable, 
although  in  the  former  year  the  export  price  fell  below  the  average 
wholesale  price  and  in  the  latter  year  was  only  2  cents  above  it. 

>►  It  is  the  year  1916-17,  however,  which  affords  the  most  striking 

contrast  between  the  movement  of  the  export  price  and  other  prices 
in  the  group,  as  is  indicated  by  an  advance  of  only  47  points  in  the 
export  price  index  number  in  contrast  with  an  advance  of  73  points 

►  in  the  index  number  for  the  group  as  a  whole,  and  of  104  points  in  the 
wholesale  price  shown  in  the  table.  This  is,  of  course,  the  result  of 
the  large  contracts  for  future  delivery  purchased  by  foreign  buyers  in 
the  early  part  of  1916-17,  to  which  reference  has  already  been  made. 

Foreign  trade  statistics  of  the  Biu-eau  of  Foreign  and  Domestic 
Commerce  afford  an  interesting  illustration  of  the  advantage  derived 
by  England  from  the  correct  forecast  of  future  demands  for  flour  by 
its  representatives.  These  statistics  show  that  the  average  export 
price  on  flour  sent  to  England  in  1916-17  was  66  cents  per  barrel 
less  than  on  that  sent  to  other  countries,  but  that  in  the  following 
year  it  was  5  cents  per  barrel  more.  Turning  again  to  the  general 
averages,  it  is  interesting  to  note  that  in  1916-17  the  export  price 
was  75  cents  per  barrel  less  than  the  average  millers'  receipts  for 
flour  shown  in  the  table,  while  in  1917-18  it  was  97  cents  per  barrel 
more. 


46 


COMMERCIAL   WHEAT-FLOUR"  MILLING. 


Table  14  shows  an  increase  in  the  wholesale  price,  also  based  on 
the  Minneapolis  and  Kansas  City  data,  from  $4.22  in  1913-14  to 
110.53  in  1917-18.  This  is  an  advance  of  150  per  cent,  or  somewhat 
more  than  the  advance  for  the  group  as  a  whole.  The  difference, 
however,  is  not  more  than  may  be  accounted  for  through  the  spe- 
cialized character  of  the  wholesale  price  as  compared  with  prices  for 
the  entire  group.  The  difference  between  the  wholesale  price  and 
the  average  receipts  of  the  millers  is  still  narrower  if  the  advance  in 
prices  over  the  entire  period  is  taken,  since  there  is  a  variation  of 
only  4  points  between  the  index  numbers  for  the  two  prices  in  1917-18. 
Nevertheless,  the  increase  in  the  margin  between  the  wholesale 
prices  and  the  millers'  receipts  from  7  cents  in  1913-14  to  31  cents 
in  1917-18  should  be  noted.  A  comparison  of  the  intermediate 
years  indicates,  however,  that  the  margin  between  the  wholesale 
price  and  the  millers'  receipts  in  1913-14  was  probably  exceptional, 
yet  hardly  so  much  so  as  the  difference  of  $1.43  found  in  1916-17. 
The  low  relative  receipts  of  the  millers  as  compared  with  the  whole- 
sale price  in  1916-17  is  apparently  due  to  contracts  for  future  dehv- 
eries  in  that  year  of  rapidly  advancing  prices  which  have  already 
been  mentioned  as  responsible  for  the  low  index  number  for  the 
export  price. 

Average  millers'  receipts  should  in  general  be  almost  as  good  an 
index  of  fluctuations  in  the  price  paid  as  wholesale  prices  per  barrel 
and,  as  already  noted,  the  advances  in  the  wholesale  price  and  in 
millers'  receipts  over  the  entire  period  were  practically  the  same. 
The  actual  cost  of  flour  during  these  years  was  in  all  probabihty 
somewhere  between  millers'  receipts  and  the  wholesale  price  shown 
by  the  table,  since  the  price  paid  must  include  freight  and  middle- 
men's charges  in  addition  to  millers'  receipts  whenever  the  flour  is 
handled  by  the  wholesale  merchant. 

Millers'  receipts  for  feed  show  the  smallest  advance  of  any  item 
included  in  the  table.  The  figure  for  1917-18  is  hardly  70  per  cent 
in  advance  of  that  for  1913-14,  the  indicated  increase  in  price  being 
bcu'ely  half  that  shown  for  the  group  as  a  whole. 

Neither  millers'  receipts  for  flour  nor  for  feed  alone  afford  an  index 
to  the  effect  of  price  changes  on  the  prosperity  of  the  millers.  A 
better  index  is  found  in  the  fluctuations  of  the  combined  receipts  for 
flour  and  feed.  Table  14  shows  that  this  amount  advanced  less, 
relatively,  than  average  prices  for  the  entire  group  in  every  year 
except  1916-17.  For  the  five-year  period  its  advance  was  only  134 
per  cent,  as  compared  with  139  per  cent  for  the  group  as  a  whole. 
This  difference  is,  of  course,  so  small  that  it  can  not  be  accepted  as 
an  indication  that  the  miller's  receipts  in  general  did  not  keep  fairly 
in  line  with  the  advance  in  prices  paid  by  him  for  his  raw  material 
and  received  by  the  merchant  on  resale  of  flour.     It  is  true  that  the 


COSTS,  PRICES,   AND  PROFITS. 


47 


general  indication  of  the  table  is  that  wholesale  prices  advanced 
more  rapidly  than  the  miller's  receipts  for  his  entire  product.  This 
difference  would  have  been  much  less  in  some  years  if  wholesale 
prices  had  been  compared  with  the  miller's  receipts  from  domestic 
sales  instead  of  with  his  combined  receipts  from  exports  and  domestic 
sales  shown  in  the  table. 

An  interesting  feature  of  Table  14  is  the  narrow  margin  between 
the  cost  of  the  wheat  used  in  producing  a  barrel  of  flour  and  the 
average  receipts  of  the  miller  for  that  flour.  In  1914-15  this  margin 
was  only  13  cents,  yet  it  will  be  shown  later  that  that  was  a  relatively 
prosperous  year  for  the  miller.  The  explanation  is  in  the  high  price 
of  feed  in  1914-15  as  compared  with  the  preceding  and  following 
year.  In  1915-16  receipts  for  flour  exceeded  cost  of  wheat  by  16 
cents  and  in  the  first  year  of  the  period  by  19  cents.  In  1916-17,  a 
year  of  great  prosperity  for  the  miller,  his  receipts  for  flour  exceeded 
the  cost  of  wheat  by  only  23  cents.  '  The  table  shows,  however,  that 
under  Government  regulation  in  1917-18  this  difference  was  increased 
to  50  cents.  The  necessity  of  this  greater  margin  in  1917-18  is  at  once 
evident  if  it  is  noted  that  there  was  an  increase  of  $1.40  in  the  miller's 
cost  of  wheat  but  an  increase  of  only  4  cents  in  his  receipts  from  the 
feed  made  from  that  wheat. 

A  better  test  of  the  relation  of  the  miller's  cost  of  wheat  to  his  pros- 
perity is  found  by  comparing  the  relative  advance  in  the  cost  of  his 
wheat  with  his  combined  receipts  for  flour  and  feed.  Table  14  shows 
that  while  the  cost  of  his  wheat  advanced  146  per  cent  during  the 
period,  his  combined  receipts  increased  only  134  per  cent;  that  is,  he 
was  in  a  somewhat  less  favorable  condition  in  regard  to  the  cost  of 
his  raw  material  in  1917-18  than  he  was  in  1913-14.  Comparison 
of  the  figures  throughout  the  period,  however,  indicate  the  possi- 
bility that  the  cost  of  wheat  to  the  miller  in  1913-14  may  have  been 
exceptionally  high,  since  there  is  an  increasing  tendency  for  the  ad- 
vance in  total  receipts  to  fall  behind  that  of  cost  of  wheat  from  year 
to  year. 

Prices  paid  the  farmer  for  his  wheat  advanced  more  slowly  than 
the  other  prices  in  the  table  until  1917-18,  in  which  year  the  Govern- 
ment-stabilized price  of  wheat  shows  an  advance  of  160  per  cent 
above  the  1913-14  level,  in  contrast  with  the  139  per  cent  advance 
for  the  group  as  a  whole.  A  more  interesting  comparison,  however, 
is  that  between  the  farmer's  receipts  for  the  quantity  of  wheat  put 
into  a  barrel  of  flour  and  the  cost  of  that  same  quantity  to  representa- 
tive millers.  To  illustrate,  the  table  shows  that  in  1916-17  this  wheat 
cost  the  miller  110  per  cent  more  than  it  did  in  1913-14,  but  the 
farmer,  according  to  the  table,  got  only  89  per  cent  more  for  it.  The 
margin  between  the  farmer's  receipts  and  the  miller's  cost  in  1913-14 
had  been  only  46  cents,  but  in  1916-17  it  had  increased  to  $1.70. 


L- 


48 


COMMERCIAL   WHEAT-FLOUR  MILLING. 


In  making  these  comparisons  it  must  always  be  remembered  that 
the  wheat  price  used  is  an  average  estimated  price  for  all  wheat  sold 
in  the  United  States,  while  the  miller's  cost  is  based  on  purchases  of 
less  than  30  per  cent  of  the  total  crop.  It  is  probable,  however,  that 
the  receipts  of  the  farmer  for  the  30  per  cent  and  for  the  entire  crop 
over  a  series  of  years  will  have  a  nearly  parallel  movement.  Com- 
parisons based  upon  the  data  in  Table  14,  therefore,  merit  consider- 
ation so  long  as  better  sources  of  information  are  not  available. 

Keeping  the  above  limitations  on  the  data  in  mind,  the  following 
table  of  relatives  based  on  millers'  receipts,  millers'  cost  of  wheat  and 
farmers'  receipts  for  wheat  is  instructive: 


Millers'  receipts. . . 
Millers'  wheat  cost 
Farmers'  receipts. . 
other  wheat  costs. 


1913-14 


100 

80 

71 

9 


1914-15 


100 
85 
70 
15 


1915-16 


100 
85 
74 
11 


1916-17 


100 
83 
68 
17 


1917-18 


100 

84 

79 

5 


Because  of  the  Government's  stabilization  of  wheat  prices  through- 
out the  country  in  1917-18  the  figures  for  that  year  are  unquestion- 
ably more  worthy  of  confidence  than  those  for  the  other  years.  The 
general  showing,  however,  that  transportation  expenses,  storage 
charges,  and  the  profits  of  the  wheat  holders  constituted  practically 
twice  as  large  a  part  of  the  consumer's  price  of  flour  in  1916-17  as  in 
1913-14,  appears  altogether  probable.  Furthermore,  the  increase 
in  relative  farmers'  receipts  from  68  in  1916-17  to  79  in  1917-18  is 
fairly  positive  proof  of  the  advantage  to  the  farmer  of  Government 
regulations  during  the  war  so  far  as  such  regulations  affected  flour 
and  wheat.  It  would  be  entirely  unwarranted,  however,  to  assume 
that  the  relation  of  these  figures  to  each  other  is  any  exact  measure 
of  the  benefit  received  by  the  farmer.  Increased  costs  of  transporta- 
tion and  storage  accounted  for  part  of  the  greatly  increased  difference 
between  farmers'  receipts  and  millers'  costs  in  1916-17,  but  most  of 
it  was  unquestionably  absorbed  by  the  holder  of  wheat  during  the 
panic  that  reached  its  climax  in  May,  1917,  when  wheat  was  sold  in 
Chicago  for  $3.45  per  bushel. 

The  extraordinary  speculative  margin  shown  above  for  1916-17 
sales  calls  for  close  observation  of  the  relation  of  farmers'  receipts 
to  millers'  costs  in  other  years.  According  to  the  Department  of 
Agriculture  the  farmer  was  getting  99  cents  a  bushel  for  his  wheat 
on  July  1,  1912,  and  only  79  cents  nine  months  later.  The  Commis- 
'  sion  has  incomplete  data  pointing  to  a  margin  between  farmers' 
receipts  and  millers'  costs  in  that  year  of  about  20  cents  per  barrel; 
that  is,  the  20  per  cent  decline  in  wheat  prices  had  reduced  the 
margin   to  a  minimum.     Speculative  holding  of  wheat  that  year, 


COSTS,  PRICES,   AND  PBOFITS. 


49 


whether  by  farmer  or  trader,  was  unprofitable.  The  trend  of  the 
market  in  1913-14  was  again  downward,  and  the  farmers'  price  fell 
from  81.4  cents  at  the  beginning  to  76.9  cents  at  the  end  of  the  year. 
The  margin  between  farmers'  receipts  and  millers'  costs  that  year 
was  46  cents.  The  much  smaller  decrease  in  the  farmers'  price 
during  the  year  had  allowed  the  margin  to  double,  but  still  kept  it 

relatively  small. 

These  two  succeeding  years  of  declining  prices,  together  with  the 
advance  of  the  farmer's  price  to  $1,078  on  January  1,  1915,  in  the 
face  of  a  crop  over  125  million  bushels  larger  than  had  ever  before 
been  raised  in  the  United  States,  sufficiently  explain  why  the  farmers 
sold  615  million  bushels  of  wheat  in  the  first  six  months  of  1914-15 
and  had  only  189  million  bushels  left  to  sell  in  the  other  six  months 
of  the  year.  The  consequent  small  sales  in  the  next  four  months 
resulted  in  an  advance  of  the  farmer's  price  to  $1,396  on  May  1,  1915. 
On  account  of  the  early  marketing  of  the  crop,  however,  although  the 
average  cost  to  representative  commercial  millers  was  $5.42,  farmers 
throughout  the  country  received  on  an  average  only  $4.47  for  the 
quantity  of  wheat  used  in  a  barrel  of  flour.  The  relation  between 
the  advancing  price  and  the  increased  margin  seems  clear. 

The  influence  of  these  heavy  speculative  gains  is  evident  in  the 
relatively  smaller  sales  by  farmers  in  the  early  part  of  1915-16.  But 
the  billion-bushel  wheat  crop  of  the  United  States,  reinforced  by 
extraordinary  increases  in  the  production  of  Canada  and  Austraha, 
drove  the  farmer's  price  down  from  $1,396  on  May  1,  1915,  to  $1,025 
on  May  1,  1916.  The  margin  between  the  farmer's  receipts  and  the 
miller's  costs  dropped  back,  as  was  to  be  expected,  from  95  cents  in 
1914-15  to  64  cents  in  1915-16. 

The  farmer  must  have  been  strongly  impressed  by  the  losses  on 
speculative  holdings  of  the  1915  harvest.  His  wheat  marketing  in 
the  fall  of  1916  was  relatively  heavier  than  it  had  been  even  in  1914. 
The  average  farm  price  on  August  1,  1916,  was  $1,071  and  his  sales 
that  month  amounted  to  111  million  bushels.  Consequently, 
although  the  average  farm  price  went  up  to  $2,485  on  June  1,  1917, 
he  had  only  13  million  bushels  left  to  sell  that  month.  The  effect  on 
the  margin  between  the  farmers'  receipts  and  millers'  costs  has 
already  been  noted.  The  farmers  of  the  United  States  would 
probably  have  held  much  of  the  wheat  they  sold  in  the  early  part  of 
1916-17  if  they  had  known  as  much  of  prospective  ocean  transpor- 
tation conditions  as  was  known  by  European  purchasers  of  wheat 

and  flour. 

This  brief  review  of  price  fluctuations  shows  the  cause  of  the  profit 
realized  in  holding  wheat  of  the  1914  and   1916  crops,   and  also 
explains  why  the  farmer  could  not  have  been  expected  to  store  his 
188256°— 20 4 


5^  COMMERCIAL   WHEAT-FLOUR   MILLING. 

wheat  and  share  in  this  speculative  gain.  It  should  not  be  forgotten, 
however,  that  storage,  transportation,  and  incidental  charges  were 
also  advancing. 

Section  2.  Cost  of  selling  flour. 

Mill  SALES.— Fluctuations  in  the  price  of  flour,  such  as  those  dis- 
cussed in  the  preceding  section,  are  by  no  means  entirely  due  to 
changes  in  the  costs  and  profits  of  the  millers.  The  flour  trade  of 
the  country  must  be  taken  into  consideration  as  well  as  the  flour 
industry.  The  large  toll  paid  to  the  railroads,  ah-eady  referred  to 
on  page  11,  also  constitutes  part  of  the  costs  of  distribution  included 
in  the  price  paid  by  the  consumer. 

The  mills,  of  course,  are  engaged  in  the  flour  trade.  Many  sell 
direct  to  consumers,  many  sell  to  bakers.  Some  distribute  large 
quantities  of  flour  to  the  dealers  through  their  branch  houses 
Unfortunately  the  accounts  examined  by  the  commission  were  not 
in  sufficient  detail  to  permit  a  satisfactory  segregation  of  selling 
expenses  from  the  general  expenses.  Therefore,  they  are  included  in 
the  general  expense  of  operation  in  the  discussion  of  millers'  costs. 

The  question  of  the  cost  of  distribution  has,  however,  assumed 
special  importance  in  the  relations  between  the  Food  Administration 
and  the  millers.  In  fact,  it  was  necessary  to  establish  certain  con- 
tract allowances  for  the  different  trade  services  of  the  miller  to  differ- 
ent classes  of  customers.  These  allowances,  of  course,  are  intended 
to  cover  profits  as  well  as  costs.  Furthermore,  it  is  probable  that 
they  are  considerably  above  a  normal  average  charge  for  tlie  services 
which  they  cover.  Otherwise,  a  large  number  of  mills,  whose  costs 
are  above  the  average,  might  have  been  driven  out  of  the  business, 
and  it  has  evidently  been  the  purpose  of  the  Food  Administration 
and  the  Grain  Corporation  to  put  no  regulations  into  effect  which 
would  be  mjurious  to  business  concerns  on  whose  services  consumers 
in  their  own  immediate  vicinity  were  dependent  in  normal  times, 
unless  public  interest  compelled  them  to  do  so. 

The  charges  allowed  in  the  contract  between  the  Grain  Corpora- 
tion and  the  millers  are  of  practical  importance,  however,  even 
though  they  represent  a  presumable  maximum  of  costs  and  reason- 
able profits  in  the  selling  of  flour  at  wholesale  and  retail.  For  that 
reason  they  are  shown  below: 

Deliveries  in  carload  lots »q  i  c 

Deliveries  in  mixed  carloads  (part  flour,  part  feed) *  40 

Sales  from  cars  or  docks,  car  lota  (not  delivered)  of  flour  forwarded 

"on  consignment " ^q 

Sales  from  cars  or  docks,  less  than  carload  (not  delivered)  of  flour 

forwarded  "on  consignment" ^q 

Sales  in  less  than  carload  lots  (not  to  consumer) *  * '  55 

Sales  to  consumers  (not  bakers  or  public  eating  places) ..........  i,Z6 


COSTS,  PRICES,  AND  PROFITS. 


51 


The  flour  trade. — ^Aside  from  the  mills  and  their  branch 
houses,  the  flour  trade  includes  many  wholesale  grocers,  most  retail 
grocers,  brokers,  and  car-lot  and  less-than-car-lot  flour  jobbers.  As 
the  milling  of  flour  has  concentrated  in  the  hands  of  the  larger 
concerns  the  quantity  of  flour  sold  by  mill  agents  and  mill  branches 
has  increased,  and  the  flour  business  of  other  distributors  has  de- 
creased. An  increase  in  the  number  of  bakers  able  to  buy  in  car- 
load lots  directly  from  the  mill  has  also  cut  down  the  sales  of  other 
distributors.  Many  small  bakers  continue  to  buy  of  their  local  job- 
bers because  they  obtain  credit  from  them  that  the  mills  are  not 
willing  to  grant. 

The  flour  trade  performs  the  usual  functions;  that  is,  it  takes 
care  of  the  transportation,  storage,  and  deliveries  of  flour,  and  grants 
credit  to  purchasers.  Storage  in  the  flour  trade  tends  to  decrease; 
direct  deliveries  from  cars  to  small  traders  and  consumers  to  increase. 
Cartage,  the  largest  single  item  of  expense,  and  other  delivery  charges 
are  advancing.  Very  little  credit  is  granted  in  the  car-lot  business, 
but  losses  on  account  of  bad  debts  have  in  the  past  been  a  consider- 
able item  in  the  accounts  of  jobbers  who  sold  to  small  local  bakers. 

The  margin  between  purchase  and  sales  prices  for  different  dis- 
tributors and  at  different  times  has  little  consistency.  Big  jobbers 
whose  business  operations  do  not  extend  to  storage  and  cartage, 
usually  have  small  expenses,  and  at  times  their  margin  is  small — 
much  smaller  than  that  of  equally  large  operators  who,  in  addition 
to  customary  trade  services,  blend  the  flour  of  different  mills  to  pro- 
duce the  qualities  demanded  by  their  trade.  Occasionally,  the 
profit  of  the  first  class  of  jobbers  referred  to  above  will  contain  a 
large  amount  of  speculative  gain,  resulting  in  a  margin  much  greater 
than  that  of  concerns  whose  expenses  cover  the  semi-industrial 
operations  involved  in  blending,  testing,  warehousing,  handling,  and 
lightering. 

Grocers'  flour  trade. — Practically  all  the  flour  consumed  in 
individual  households  is  sold  by  retail  grocers.  The  retail  grocers 
themselves  buy  much  of  this  flour  from  wholesale  grocers  but,  also, 
a  considerable  part  of  it  directly  from  the  millers.  There  is,  however, 
in  most  cases,  no  satisfactory  method  of  separating  the  grocer's 
flour  expenses  from  his  other  expenses.  For  this  reason,  and  because 
of  the  magnitude  of  the  work,  it  was  not  deemed  advisable  to  im- 
dertake  to  determine  the  margin  of  profit  on  sales  of  flour  either  in 
the  wholesale  or  retail  grocers'  trade. 

Car-lot  flour  jobbing. — The  accounts  of  five  car-lot  jobbers 
selling  in  the  aggregate  from  a  million  to  a  million  and  a  half  barrels  of 
flour  annually  were  examined  over  a  five-year  period.  The  business 
of  these  different  concerns  varied  so  greatly  and,  in  the  last  of  the 
five  years,  business  in  flour  substitutes  was  so  confused  with  wheat- 


52 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


flour  business,  that  no  statistical  presentation  of  costs  and  profits 
for  this  group  has  been  attempted. 

The  data  show,  for  example,  that  receipts  for  one  very  large  car-lot 
jobber  increased  from  $4.59  per  barrel  in  the  calendar  year  1914  to 
$13.24  in  1917 — an  increase  of  188  per  cent  over  the  period.  The 
sales  of  another  car-lot  jobber  doing  a  good  business  showed  an 
increase  in  net  receipts  per  barrel  from  $4.56  to  $9.04,  an  increase 
of  less  than  100  per  cent.  It  is  evident  that  such  data  could  not  be 
combined  imless  they  were  sufficiently  comprehensive  to  give  assur- 
ance of  representative  results,  and  this  was  not  the  case. 

It  is  of  interest  to  know,  however,  that  the  business  of  the  first 
jobber  referred  to  above,  which  is  apparently  typical  of  a  limited 
group  of  similar  large  concerns,  was  done  on  an  expense  of  4  cents 
(no  allowance  being  made  for  proprietors'  salaries)  and  a  net  profit 
of  10  cents  per  barrel  in  1914;  and  that  these  figures  had  increased 
respectively  to  7  cents  and  46  cents  in  1917,  dropping  back  to  5 
cents  and  14  cents  in  1918.  The  large  profit  in  1917  was  undoubtedly 
due  to  the  highly  speculative  conditions  of  that  year. 

Car-lot  jobbing  expenses  for  individual  concerns,  according  to  the 
accounts  examined,  varied  from  the  4  cents  per  barrel  in  1914, 
already  noted,  to  37  cents  per  barrel  for  a  blending  concern  over  a 
17-months'  period  from  August  1,  1917,  to  December  31,  1918. 
Excluding  the  extreme  figures  just  noted,  expenses  shown  by  the 
different  accounts  ranged  from  5  cents  to  16  cents  in  1914  and  from 
6  cents  to  19  cents  in  1918. 

AU  accounts  showed  a  relatively  high  net  profit  in  1917.  The 
business  as  a  whole  probably  made  twice  its  normal  profit  in  that  year. 
None  of  the  concerns  showed  a  net  loss  in  any  of  the  five  years.  In 
fact,  the  minimum  profit  did  not  fall  below  10  cents  per  barrel,  but 
in  a  great  majority  of  cases  it  was  less  than  20  cents  per  barrel. 

On  the  whole  the  accounts  examined  indicate  that  the  normal 
gross  margin  for  car-lot  jobbers  ranged  between  15  and  40  cents  per 
barrel,  largely  depending  on  the  nature  of  the  business  done  by  the 
different  concerns.  In  1917,  however,  the  gross  margin  shown  in 
the  accounts  examined  ranged  from  30  cents  to  59  cents  per  barrel. 
In  1918  margins  were  more  normal,  the  accounts  showing  18  cents 
as  a  minimum  and  50  cents  as  a  maximum. 

Less  than  oar-lot  jobbing. — ^The  Commission  examined  the 
accounts  of  New  York  jobbers  selling  flour  in  less  than  car  lots, 
whose  sales  in  the  aggregate  exceeded  2,000,000  barrels  annually. 
The  character  of  the  business  done  by  the  different  concerns  varied 
greatly.  The  relations  of  certain  concerns  with  the  big  mills  distin- 
guished their  business  sharply  from  that  of  their  competitors.  Others 
confined  their  sales  almost  entirely  to  small  bakers.  Because  of 
difference  in  customers  and  services  rendered  them,  there  was  a 


costs,  prices,  and  profits. 


53 


considerable  variation  in  prices,  profits,  and  expenses.  One  small 
concern  showed  a  net  loss  of  21  cents  per  barrel  in  1917,  while  the 
others  showed  net  profits  ranging  from  13  cents  to  94  cents. 

Because  of  these  differences  in  the  character  of  the  business  done  by 
different  concerns,  and  because  methods  of  accounting  did  not  make 
a  satisfactory  segregation  of  flour  receipts  and  expenditures  possible, 
the  figures  presented  below  should  not  be  regarded  as  typical  of  all 
jobbing  sales  in  less  than  carload  lots,  nor  as  exactly  accurate  for  the 
business  covered.  They  do,  however,  cover  so  large  an  amount  of 
business  and  with  such  an  approximation  to  the  actual  results  of 
business  done  in  flour  alone,  that  there  can  be  but  little  question  of 
their  practical  utility  for  comparative  purposes. 

Table  15. — Average  receipts,  costs,  gross  margin,  expense,  and  profit  on  certain  New 
York  jobbers'  sales  of  wheat  Jlour  in  less  than  carload  lots,  by  years,  1914-1918. 


Calendar  years. 

Sales  covered. 

Receipts. 

Flour 
costs. 

Gross 
margin. 

Expense. 

Profit. 

1914 

Barrels. 
1,694,607 
2. 124, 703 
2,357,761 
2, 129, 858 
2,550,439 

$4.86 

6.43 

6.65 

10.85 

11.47 

$4.45 

6.00 

6.10 

10.06 

10.92 

Cents. 
41 
43 
55 
79 
55 

Cents. 
25 
27 
32 
44 
39 

Cents. 
16 

1915 

16 

1916 

23 

1917 

35 

1918 

16 

The  table  shows  that  just  before  the  war  wheat  flour  was  selling 
to  small  traders  and  to  bakers  in  New  York  City  for  a  little  less  than 
$5  per  barrel.  There  was  some  fluctuation  in  the  flour  market  on 
t**e  one  hand  because  of  the  increased  European  demand  directly 
after  the  outbreak  of  the  war  and  on  the  other  hand  because  of  the 
larger  wheat  crops  in  Canada  and  Australia  in  1915.  The  net  effect 
of  these  fluctuations  on  the  New  York  flour  market  for  1915  and 
1916  appears  to  have  been  an  advance  of  about  33  J  per  cent  in  the 
prevailing  wholesale  prices  of  flour  in  those  two  years  as  compared 
with  prewar  prices.  The  price  shown  for  1918  was  135  per  cent 
higher  than  that  shown  for  1914.  This  probably  indicates  with  a 
fair  degree  of  accuracy  the  upper  limit  of  the  war's  influence  on  whole- 
sale prices  in  New  York  City.  It  is  interesting  to  note  that  while 
the  rate  of  increase  shown  here  for  the  New  York  price  over  the  five- 
year  period  was  less  by  14  per  cent  than  the  rate  shown  for  the  whole- 
sale price  of  flour  in  Table  14,  the  amoxmt  of  increase  was  $6.61,  or 
30  cents  more  than  the  $6.31  shown  in  that  table. 

The  table  shows  the  jobber's  purchase  price  for  flour  advancing 
at  a  more  rapid  rate  than  his  selhng  price.  As  a  result,  during  the 
five  years  covered,  the  margin  between  costs  and  receipts  advanced 
barely  35  per  cent.  In  the  exceptional  year,  1917,  it  was  not  far 
from  double  what  it  had  been  in  1914. 


54 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


4 


Just  as  purchase  price  encroached  on  price  received,  expenses 
encroached  on  margin  realized.  Consequently,  in  spite  of  the  in- 
crease of  35  per  cent  in  the  margin  the  net  profit  shows  no  change. 
In  1914  and  in  1915  it  had  been  16  cents  per  barrel  and  although 
it  advanced  to  35  cents  in  1917,  in  1918  it  fell  to  16  cents  again. 

Probably  the  most  important  showing  of  the  table,  and  the  one 
that  can  be  accepted  with  the  most  confidence,  is  the  increase  in 
expenses  of  fully  50  per  cent,  from  25  and  27  cents  in  the  first  two 
years  to  44  cents  in  1917  and  39  cents  in  1918.  It  should  be  noted 
that  the  excess  of  expense  in  1917  over  1918  was  probably  due  to 
charging  off  an  accumulation  of  bad  debts  in  that  year. 

The  accounts  of  several  Boston  jobbers  who  sold  flour  in  less  than 
car  lots  were  examined.  They  are  open  to  the  same  criticisms  as 
those  made  in  regard  to  data  collected  in  New  York,  but  they,  never- 
theless, substantiate  in  a  general  way  the  conclusions  in  regard  to  the 
course  of  prices,  costs,  and  profits  drawn  from  the  table  on  page  53. 
Where  there  are  differences  of  any  moment  in  the  first  three  years 
they  are  quite  clearly  due  to  the  exceptional  results  obtained  by 
one  or  two  concerns  either  in  one  city  or  in  the  other.  In  1917, 
however,  three  or  four  New  York  concerns  made  very  high  profits 
and  there  is  little  doubt  that  (including  these  exceptional  cases)  less 
than  car-lot  jobbing  was  more  profitable  in  New  York  in  1917  than 
it  was  in  Boston. 

Some  data  on  flour  jobbing  in  less  than  car  lots  were  obtained  for 
other  large  cities  east  of  the  Mississippi  River.  These  also  support 
the  more  comprehensive  data  obtained  for  New  York.  Larger  profits 
in  1917  and  in  1918  were  found  in  some  other  cities  than  in  New 
York.  It  was  not  clear,  however,  that  the  differences  might  not  be 
due  to  differences  in  the  character  of  the  business  done. 

Section  3.  Flour-mill  acconiits. 

The  success  of  cost  and  profit  inquiries  of  necessity  depends  on 
the  completeness  and  accuracy  of  the  records  and  accounts  of  the 
concerns  whose  costs  and  profits  are  examined.  Since  the  rate  of 
profit  on  investment  is  of  prime  importance  no  strictly  accurate 
report  on  flour-mill  profits  in  the  United  States  can  be  made  unless 
the  amount  of  capital  invested  can  be  determined  with  a  fair  degree 
of  accuracy.  The  experience  of  the  accountants  of  the  Commission, 
however,  indicates  that  large  numbers  of  milling  concerns  in  the 
United  States  have  no  records  from  which  their  investment  in  mill 
building  and  flour  plants  could  be  correctly  ascertained.  One  of 
the  largest  milling  concerns  east  of  the  Mississippi  when  first  visited 
by  the  Commission's  accountants  had  no  amount  on  its  books  repre- 
senting investment  in  land,  buildings,  or  machinery. 

No  satisfactory  report  on  profits  per  barrel  of  flour  for  the  entire 
country  can  be  made  as  long  as  it  is  impossible  to  determine  the 


COSTS,  PRICES,  AND  PROFITS. 


55 


quantity  and  value  of  flour  sold  by  the  different  mills ;  yet  the  Com- 
mission found  mill  after  mill  whose  record  of  sales  made  no  distinc- 
tion between  flour,  feed,  and  other  products  prior  to  beginning  their 
reports  to  the  Food  Administration.  It  was,  therefore,  necessary 
to  separate  a  large  volume  of  flour  sales  from  sales  of  other  products 
in  order  to  obtain  suflicient  price  information  to  be  fairly  represen- 
tative. 

In  the  matter  of  costs  a  seemingly  insurmountable  obstacle  was 
encountered  in  mill  after  mill  because  flour,  feed,  and  other  products 
had  not  been  segregated  in  the  inventories.  In  less  frequent  cases 
the  same  difficulty  was  met  in  inventories  of  raw  materials.  Only 
through  the  cooperation  of  the  millers  were  the  accountants  finally 
able  to  make  these  segregations  in  a  sufficient  number  of  mills  to 
meet  absolutely  necessary  requirements.  Other  difficulties  with 
the  accounts  were  also  encountered.  Items  of  overhead  expense, 
such  as  depreciation,  bad  debts,  etc.,  were  ignored  for  several  years 
in  some  cases  and  then  adjusted  in  a  single  year.  Instances  were 
also  found  where  the  records  pertaining  to  interest,  insurance,  and 
taxes  were  not  definite  with  respect  to  the  period  covered. 

Furtheimore,  cost  accounts  were  seriously  vitiated  by  the  use  of 
market  value  in  the  place  of  actual  or  average  cost  of  grain,  flour, 
and  sacks  in  taking  inventories.  This  bad  accounting  practice  was 
defended  as  offsetting  to  some  extent  the  equally  bad  practice  of 
increasing  or  decreasing  profits  by  the  estimated  profit  or  loss  on 
unfilled  orders.  The  latter  practice  is  the  more  to  be  condemned 
because  it  transfers  profits  or  losses  from  the  year  in  which  they  are 
realized  into  the  preceding  year,  while  continuing  to  show  the  sales 
in  the  year  in  which  the  delivery  is  made.  It  was  fortunately  found 
possible,  however,  to  place  the  wheat  and  flour  inventories  of  the 
important  companies  on  an  approximate  cost  valuation,  and  all 
estimates  of  gains  or  losses  on  unfilled  orders  were  rejected. 

The  Commission  found  that,  on  the  whole,  mill  records  for  1916-17 
and  1917-18  showed  a  distinct  improvement  over  those  for  the 
earlier  years.  Furthermore,  there  was  a  decided  disposition  on  the 
part  of  the  millers  to  carry  the  matter  forward  to  a  point  where  the 
accounts  would  show  in  some  detail  their  actual  operating  results. 

The  year  1917-18,  however,  brought  additional  accounting  prob- 
lems due  to  the  cooperation  of  the  millers  with  the  Food  Administra- 
tion. These  complications  affected  the  Commission's  inquiry  in 
two  ways:  First,  a  number  of  the  Commission's  accountants  in 
cooperation  with  the  Food  Administration  gave  their  entire  time 
for  several  months  to  the  monthly  operating  reports  of  the  millers 
which  were  being  made  out  to  comply  with  the  Government  regula- 
tions. This  work  was  continued  until  it  was  found  that  the  Food 
Administration  would  be  able  to  dispense  with  such  assistance. 


56 


COMMEBCIAL  WHEAT-FLOUB  MILLING. 


Second^  the  Food  Administration's  requirement  of  a  separate  accoimt- 
ing  period  running  from  September  1  or  10,  1917,  to  June  30,  1918, 
produced  further  complications  in  the  accounts.  This  made  it 
somewhat  more  difficult  for  the  Commission  to  obtain  data  for  the 
year  1917-18  that  would  be  strictly  comparable  with  information 
already  collected  for  the  preceding  four  years.  Furthermore,  the 
increase  in  the  millers'  accounting  work  because  of  their  cooperation 
with  the  Food  Administration  made  it  desirable  to  reduce  the  time 
spent  in  the  mill  offices  and  the  scope  of  the  reports  required  from 
milling  concerns  to  the  lowest  possible  limit. 

The  problem  presented  to  the  Commission  was  the  preparation 
of  a  report  on  the  prices,  costs,  and  profits  of  conmiercial  flour  mills 
during  the  years  1913-14  to  1917-18,  which  would  furnish  informa- 
tion of  some  practical  value  while  at  the  same  time  due  consideration 
was  given  to  the  situation  outlined  above. 

Section  4.  Scope  of  inquiry  into  costs  and  profits. 

The  conditions  discussed  in  the  preceding  section  called  for  a 
careful  delimitation  of  the  Commission's  report  on  costs  and  profits 
in  the  flour-mill  industry.  Custom  mills  have  no  influence  in  the 
general  commercial  flour  market,  and  therefore  their  costs  and  profits 
are  immaterial  in  the  consideration  of  the  com*se  of  flour  prices  in 
commercial  markets.  The  same  is  true  of  merchant  mills  whose 
average  output,  including  custom  work,  amounts  to  only  four  or 
^re  barrels  of  flour  per  day  throughout  the  year. 

Passing  to  mills  of  considerable  size.  Table  13  shows  that  there 
were  4,297  concerns  making  from  1,000  to  20,000  barrels  annually  in 
1914.  An  account  of  their  operations  would  no  doubt  add  to  a  com- 
plete comprehension  of  the  situation  as  it  exists  at  the  present  time, 
but  the  great  number  compared  with  the  quantity  of  flour  produced 
and  the  great  difficulty  in  obtaining  the  data  made  it  inadvisable 
to  attempt  to  cover  them.  -     • 

Quite  a  different  situation  is  found  in  the  case  of  a  few  hundred 
large  mills  whose  adaptation  to  the  milling  conditions  existing  in 
the  United  States  for  the  past  20  years  or  more  has  enabled  them 
generally  to  do  a  profitable  business  at  prices  which  have  been 
gradually  eliminating  a  considerable  proportion  of  their  small  com- 
petitors. It  would  have  been  desirable,  therefore,  to  have  had  a 
full  report  on  the  operations  of  all  mills  making,  say,  above  200 
barrels  of  flour  per  day.     This,  however,  was  found  impracticable. 

The  accounts  of  the  very  large  mills,  however,  are  the  ones  that 
afford  the  most  important  information.  As  a  matter  of  fact,  80  per 
cent  of  the  people  in  the  United  States  are  dependent  on  millq  outside 
their  own  States  for  a  considerable  part  of  their  flour.  Evidently, 
therefore,  the  prices  they  pay  for  flour  depends  largely  on  the  costs 
and  the  profits  of  the  millers  in  the  great  flour-producing  centers, 


ammmm 


COSTS,  PRICES,  AND  PROFITS. 


67 


whose  flour  they  buy  either  because  they  prefer  it,  or  because  nulls 
in  their  own  locality  are  not  able  to  produce  the  quantity  of  flour 
the  community  consumes.  The  surplus  flour-producing  States  are 
found  in  three  relatively  small  groups,  10  States  in  all,  occupying 
territory  designated  in  Chapter  I  as  the  Northwestern  Selling  Area, 
the  Southwestern  Selling  Area,  and  the  Pacific  Selling  Area.  In 
those  States  by  far  the  larger  part  of  the  output,  especially  of  flour 
shipped  out  of  the  State,  is  produced  by  a  Hmited  number  of  large 
mills.  Fm-thermore,  the  competition  from  the  Pacific  Selling  Area 
does  not  affect  in  any  considerable  degree  the  prices  paid  for  flour  by 
over  nine-tenths  of  the  people  of  the  United  States,^^  because  the 
heavy  freight  charges  across  the  mountains  more  than  counter- 
balance the  advantages  afforded  these  mills  by  the  lower  cost  of  wheat. 

This  situation  indicates  that  a  relatively  small  number  of  nulls  in 
the  hard  spring  wheat  territory  of  the  Northwest  and  in  the  hard 
winter  wheat  territory  in  tiie  Southwest  together  with  a  few  concerns 
scattered  throughout  the  mixed  farming  region  stretching  from  the 
Missouri  River  to  the  Atlantic  Ocean  exert  an  important  influence 
on  the  price  of  flour  in  the  whole  country  east  of  the  Rocky  Mountains. 
During  the  panic  of  1917,  however,  the  frenzied  demand  of  the 
consumer  for  flour  at  any  price  was  the  dominating  influence  in  the 
market.  In  the  very  large  territory  referred  to  above  as  the  "mixed 
farming  region"  there  are  also  limited  areas  in  which,  under  favorable 
wheat  crop  conditions,  the  price  of  wheat  to  local  mills,  especially  if 
its  quality  is  unusually  good,  enables  such  concerns  to  push  sales  of 
flour  at  prices  which  materially  affect  the  profits  secured  by  the  large 
millers  in  these  localities. 

The  scope  of  the  report  on  costs  and  profits  determined  in  accord- 
ance with  the  situation  presented  above  is,  therefore,  limited  to  the 
following  topics: 

(1)  A  discussion  of  the  operating  results  of  a  small  group  of  large 
mills  over  the  five-year  period  beginning  with  1913-14  and  ending 
with  1917-18.  These  mills  were  selected  partly  because  their 
accounts  could  be  used  and  partly  because  most  of  them  are  so  situ- 
ated that  they  are  usually  able  to  make  advantageous  use  of  hard 
wheat. 

(2)  A  less  extended  discussion  of  prices,  costs,  and  profits  based 
on  the  accounts  of  the  principal  mills  of  the  Pacific  Northwest. 
Section  5.  The  mills  covered. 

Territorial  location  and  kini)  of  wheat  used. — Data  on  in- 
vestment and  the  returns  realized  thereon,  capable  of  fairly  satis- 
factory use,  were  obtained  from  the  accoimting  records  of  37  com- 

^  Some  business  has  been  done  by  tho  Pacific  coast  mills  in  the  cotton  States. 


68 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


panies,  operating  86  mills,**  located  in  territory  extending  from  New 
York  in  the  East  to  Billings,  Mont.,  in  the  West,  and  from  Duluth, 
Minn.,  in  the  North  to  Nashville,  Tenn.,  in  the  South.  These  mills 
are  divided  into  three  groups,  referred  to  hereafter  as  the  North- 
western group,  the  Southwestern  group,  and  the  Eastern  group. 
The  43  mills  in  the  Northwestern  group  are  owned  by  12  companies. 
One  of  these  companies  also  owns  mills  in  the  Southwestern  group, 
and  another  operates  in  all  three  districts.  The  24  mills  in  the 
Southwestern  group  are  owned  by  14  companies  and  an  equal  number 
of  companies  operate  the  19  mills  in  the  Eastern  group. 

Practically  all  of  the  mills  belonging  to  the  Northwestern  group 
are  located  in  Minnesota  and  North  Dakota.  The  mills  of  the  South- 
western group  are  nearly  all  located  in  the  neighborhood  of  Kansas 
City  or  in  the  State  of  Kansas.  A  few  mills  in  Missouri  and  in  Okla- 
homa are  in-^luded  in  this  group  because  of  the  similarity  of  operat- 
ing conditions.  The  Eastern  group  embraces  mills  located  as  far 
apart  as  Chicago  and  New  York  City,  east  and  west,  and  Grand 
Rapids,  Mich.,  and  Nashville,  Tenn.,  north  and  south. 

The  decisive  consideration  in  the  selection  of  these  companies 
was  the  possibility  of  using  their  records  in  the  compilation  of  in- 
formation which  could  be  accepted  as  reliable  in  a  degree  that  would 
warrant  comparisons  between  the  results  obtained  by  the  different 
groups  from  year  to  year.  Even  this  very  moderate  requirement 
made  it  necessary  to  reject  the  material  collected  from  a  considerable 
number  of  mills.  It  has,  however,  made  it  practicable  to  include 
some  companies  whose  records  were  in  certain  respects  unsatisfactory. 

The  mills  included  in  the  Northwestern  group  grind  only  a  negli- 
gible proportion  of  soft  wheat.  Though  it  was  impossible  to  obtain 
exact  information  on  the  subject,  it  appears  probable  that  the  pro- 
portion of  soft  wheat  ground  by  the  Southwestern  group  varies  m 
different  years  from  10  to  20  per  cent  of  all  wheat  ground,  according 
to  more  or  less  favorable  conditions  for  the  use  of  soft  wheat.  The 
conditions  referred  to  depend  not  only  on  the  proportion  of  hard  and 
soft  wheat  in  the  local  supply  but  also  on  the  relative  excellence  of 
the  two  kinds  of  wheat  in  the  crop  for  any  given  year.  The  few  mills 
in  this  group  which  grind  considerable  quantities  of  soft  ^\heat  have 
been  included  with  the  hard  wheat  mills  because  their  prices,  costs, 
and  profits  were  not  sufficiently  at  variance  from  those  of  the  hard 
wheat  mills  to  affect  materially  the  average  results  shown  for  the 
group.  It  was  desirable  morever  to  make  use  of  all  available  accoimts 
representing  the  results  obtained  by  conmiercial  mills  operating  in 
that  section  of  the  country.  These  soft  wheat  mills  were  not  put 
into  a  class  by  themselves  because  the  results  sho\\Ti  by  their  records 
could  not  be  accepted  as  typical  for  any  larger  selected  group  of  soft 
wheat  mills  and  because  comparisons  of  results  shown  for  these  mills 

•*  One  mill,  operated  independently  until  1918,  is  considered  as  belonging  to  its  present  owners  through- 
out the  five  years. 


V 


i'' 


\ 


COSTS,  PRICES,  AND  PROFITS. 


59 


themselves,  from'  year  to  year,  would  not  be  satisfactory.  It  is 
beheved,  however,  that  in  putting  the  hard  and  soft  wheat  mills  in 
one  group  any  error  in  the  accounts  that  has  not  been  eliminated 
will  not  appreciably  affect  the  averages  for  the  entire  group. 

The  information  in  regard  to  the  proportion  of  hard  and  soft 
wheat  used  by  the  mills  composing  the  Eastern  group  is  still  more 
indefinite  than  for  the  other  two  groups.     It  is  not  improbable  that 
in  some  years  more  soft  than  hard  wheat  is  used.     But  hard  wheat 
.      is  always  used  to  a  very  large  extent  by  mills  located  in  the  northwest- 
em  part  of  this  section  and  those  located  on  the  natural  route  from 
>       the  hard  wheat  regions  of  the  West  to  the  seaboard.     On  the  other 
hand,  mills  located  in  the  southern  part  of  the  territory  occupied  by 
this  group  use  soft  wheat  almost  exclusively  and  those  scattered 
^  throughout  the  territory  between  use  hard  and  soft  wheat  in  pro- 

>  portions  dictated  by  the  conditions  of  supply.  Exhibit  V  shows 
the  proportion  of  hard  and  soft  wheat  used  by  certain  mills  grouped 
territorially.  The  mills  from  which  this  information  was  received 
are  not  all  included  in  the  group  of  37  whose  accounts  were  used 

>  m  preparing  that  part  of  this  report  dealing  with  costs  and  profits. 

Consumption  of  wheat  and  output  of  flour.— Information  in 
Exhibit  III  indicates  that  mills  located  in  the  hard  wheat  States 
were  increasing  then-  output  faster  than  mills  in  the  other  States 

>  during  the  years  1899  to  1919,  inclusive.  Furthermore,  Table  13 
shows  that  the  large  commercial  mills  were  doing  a  considerably 
greater  proportion  of  the  wheat-flour  business  of  the  country  at  the 
beginning  of  the  war  than  10  years  before.     The  information  in  the 

y  following  table  in  regard  to  production  and  sales  of  the  37  companies 
whose  operations  are  to  be  discussed  was  compiled  from  the  records 
of  the  companies.  It  indicates  that  since  1914  this  process  of  locali- 
zation and  concentration  has  been  more  or  less  interrupted.     For  that 

y  reason  this  table  is  presented  for  consideration  before  proceeding  to 
the  discussion  of  the  mvestment  of  these  mills  and  the  return  realized 
thereon. 

Table  l6.~Wheat  consumption,  flour  and  feed  production,  and  flour  and  feed  sales  of  the 
>  37  selected  companies,  mill  years  1913-14  to  1917-18. 


Wheat  used  (1,000  bushels). 


1913-14 


Northwestern  group . 
Southwestern  group . 
Eastern  group 


Flour  produced  (1,000  barrels)^ 


168,062 


1914-15 


119,471 
21,170 
27,421 


Northwestern  group . 
Southwestern  group. 
Eastern  group 


37,985 


27,167 
4,695 
6,123 


170,311 


112,127 
26,173 
32,011 


1915-16 


198,892 


37,699 


24,806 
5,801 
7,092 


139,782 
28,010 
31,100 


1916-17  !  1917-18 


165,668  1  150,464 


43,761 


30,848 
6,098 
6,815 


114,063 
27,750 
23,755 


101,074 
24,313 
25,077 


35,991  !   33,901 


24,608 
6,130 
6,253 


22,960 
5,346 
5,505 


» In  addition  to  this  the  production  of  rye,  com.  barley,  and  rice  products  in  1917-18  was  as  fouows: 

iLT_Ai.       *  Barrels. 

piortnwesteni  group ^  aoc.  a<» 

Southwestern  group '.,[[[ 'SS'JS 

Eastemgroup .::::::::::::::::::::::::::::;::::::  Ssi^S 

'^^^^ 5,526,419 


60 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


Table  16. —  WJieat  consumption,  flour  and/eed  production,  and  flour  and  feed  sales  of  the 
37  selected  companies^  mill  years  1913-14  to  1917-18— Continued. 


Feed  produced  (1,000  tons) 

Northwestern  group . . . 
Southwestern  group. .. 
Eastern  group 

Flour  sales  (1,000  barrels). . 

Northwestern  group . . . 
Southwestern  group . . . 
Eastern  group 

Feed  sales  (1 ,000  tons) 

Northwestern  group . . . 
Southwestern  group . . . 
Eastern  group 


1913-14 


1,358 


1914-15 


1,398 


1915-16 


955 
180 
223 


38,450 


27,272 
5,003 
6,175 


1,364 


954 
183 
227 


911 
223 
264 


38,231 


25,090 
6,878 
7,263 


1,405 


915 
224 
266 


1,673 


1,173 
240 
260 


43,430 


30,364 
6,137 
6,929 


1,672 


1,170 
240 
262 


1916-17 


1,496 


1,055 
243 
198 


36,777 


25,145 
6,202 
5,430 


1,601 


1,057 
243 
201 


1917-18 


1,227 


822 
2a'> 
200 


34,659 


23,114 
6,712 
5,833 


1,243 


834 
206 
203 


The  degree  of  progress  in  localization  and  concentration  in  the 
flour  industry  within  any  given  period  can  not  be  exactly  established 
because  there  is  no  precise  information  in  regard  to  the  quantity  of 
wheat  ground  and  flour  produced  in  the  country.  The  consumption 
of  wheat  in  flour  mills  was  apparently  about  4  million  bushels  less 
and  the  output  of  flour  about  1  million  barrels  less  in  1917-18  than 
in  1913-14.     (See  pp.  91-97.) 

Comparing  the  figures  in  Table  16  with  those  in  the  preceding 
paragraph,  it  seems  clear  that  mills  represented  by  the  South- 
western group  continued  to  increase  their  share  in  the  coimtry's 
wheat-flour  business  from  1913-14  to  1917-18.  For  while,  according 
to  estimate,  all  mills  ground  4  million  bushels  less  wheat  and 
made  1  million  barrels  less  flour  in  the  last  year  of  the  five  than  in 
the  first,  the  Southwestern  group  ground  3  million  bushels  more 
wheat,  and  had  increased  its  output  of  flour  accordingly.  Further- 
more, this  group  did  not  lose  business  in  1916-17  as  the  other  two 
groups  did.  In  fact,  its  output  both  of  flour  and  feed  increased 
slightly  in  spite  of  a  decrease  of  a  quarter  of  a  million  bushels  in  the 
quantity  of  wheat  ground.  This  peculiar  result  is  in  part  explained 
by  the  difference  in  the  moisture  content  of  the  two  crops.  Tests 
made  by  the  Federal  Grain  Supervision  Section  of  the  Bureau  of 
Markets  show  a  moisture  content  of  13.9  per  cent  for  samples  of  hard 
red  winter  wheat  arriving  in  Kansas  City  from  the  crop  of  1915  and 
of  only  11.6  per  cent  for  samples  taken  from  the  crop  of  1916  (also 
see  Exhibit  VI). 

When  the  other  groups  are  considered,  the  results  are  strikingly 
different.  Consumption  of  wheat  by  the  Eastern  group  fell  off 
about  2i  million  bushels;  by  the  Northwestern  group  about  18i 
millions.  But  the  data  just  referred  to  indicate  that  consumption 
for  the  entire  coimtry  decreased  only  4  million  bushels.  It  follows 
that  since  wheat  used  by  the  37  companies  fell  off  18  million  bushels, 


^^f^imsan&m^- 


,'*K'^-. 


inm 


COSTS,   PRICES,   AND  PROFITS. 


61 


according  to  Table  16,  smaller  mills  not  included  in  the  37  must 
have  increased  their  consumption  of  wheat  about  14  million  bushels. 
These  figures  might  be  accepted  as  indicating  a  considerable  de- 
crease in  relative  importance  of  the  Northwestern  and  Eastern 
groups.  This  indication  seems  much  stronger,  however,  for  the 
former  than  for  the  latter. 

The  figures  for  19i7-18,  however,  do  not  establish  a  declining 
tendency  in  the  business  of  the  Northwestern  group  any  more  than 
the  figures  for  1915-16  establish  the  opposite.  Estimates  referred  to 
before  (see  Table  29)  show  an  increase  in  wheat  consumption  by  all 
mills  in  1915-16  over  the  previous  year  of  about  8  per  cent,  but 
Table  16  shows  that  wheat  consumption  by  the  Northwestern  group 
increased  about  25  per  cent  that  year.  As  has  been  seen  in  the 
preceding  paragraph,  however,  this  apparent  tendency  of  the  North- 
western group  to  increase  its  proportion  of  the  total  flour  business 
was  entirely  reversed  within  two  years.  Its  remarkable  gain  in 
1915-16  was  undoubtedly  due  to  the  fact  that  1915  was  a  year  in 
which  the  hard  spring  wheat  harvest  was  most  satisfactory  in  quality 
as  well  as  quantity.  On  the  other  hand,  winter  wheat  of  the  1915 
crop  was  quite  generally  inferior  in  quality  and  light  in  weight. 

(See  Exhibit  VI.) 

Attention  should  be  called  to  the  probable  effect  of  Government 
appeals  for  greater  production  on  the  output  of  the  smaller  mills 
in  1917-18.  Account  should  also  be  taken  of  the  fact  that  the 
quantity  of  wheat  ground  by  the  large  mills  could  not  exceed  the 
limit  fixed  by  Food  Administration  restrictions.  Furthermore,  it  is 
said  that  it  was  partly  in  response  to  appeals  from  the  Food  Ad- 
ministration that  the  Northwestern  group  produced  the  4i  miUion 
barrels  of  wheat-flour  substitutes  shown  in  Table  16.  In  preceding 
years  their  production  of  these  substitutes  had  been  negligible,  or  of 
such  small  significance  that  it  has  been  included  in  the  wheat-flour 
figures  in  the  tabulations  of  the  Commission.  It  is  evident  that  the 
conversion  of  wheat-flour  machinery  to  the  grinding  of  these  sub- 
stitutes must  have  had  some  part  in  the  decreased  production  of 
flour  by  these  mills  in  1917-18.  Special  Government  restrictions  on 
the  movement  and  consumption  of  wheat  were  also  probably  con- 
tributing factors.  In  February,  1918,  the  Minneapolis  office  of  the 
Milling  Division  issued  an  order  that  all  mills  which  had  grouiid 
75  per  cent  of  90  per  cent  of  their  average  yearly  grind  were  to  dis- 
continue operations  immediately.  Mills  that  were  grinding  for  the 
Army  and  Navy  and  those  that  were  grinding  local  wagon  wheat  for 
the  domestic  trade  were  excepted  from  this  order.  It  is  probable 
that  this  regulation  tended  to  somewhat  increase  the  relative  output 
of  the  smaller  mills. 


62 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


Table  16  shows  that  for  the  five  years  taken  together  sales  of  flour 
exceeded  the  flour  produced.  These  millft  have  a  reported  capacity 
of  about  65  million  barrels  annually,  and  have  never  produced  45 
million  barrels,  yet  they  are  buying  more  or  less  flour  every  year.  In 
no  year  of  the  five,  however,  did  such  purchases  amount  to  IJ  per 
cent  of  the  sales  of  the  37  companies.  While  no  special  investigation 
was  made  of  this  practice,  it  is  apparently  in  large  part  the  result  of 
temporary  shutdowns  of  different  plants,  or  of  occasional  increased 
demand  on  the  part  of  customers.  For  example,  much  of  the  large 
quantity  purchased  in  1913-14  was  due  to  the  biu-ning  of  a  mill.  It 
might  be  noted,  however,  that  the  other  years  in  which  sales  ex- 
ceeded production  were  all  high  wheat  cost  years.  This  suggests 
the  possibility  that  in  such  years  cost  of  production  may  have  been 
less  for  local  mills  favorably  situated  as  to  wheat  supply  than  for  the 
large  mills. 

Section  6.  Investment,  earnings,  and  distribution  of  earnings. 

The  investment  as  revised  by  the  Commission  was  computed  by 
adding  to  the  amount  of  common  and  preferred  stock  outstanding, 
outstanding  bonds,  accumulated  undivided  profits  and  the  estimated 
value  of  plants  rented  by  the  37  companies.  The  following  table 
shows  changes  made  by  the  Commission  in  the  investment  as  found 
in  the  original  accounts  at  the  beginning  and  at  the  end  of  the  five- 
year  period.  These  changes  include  deductions  under  the  items, 
"Goodwill,"  ''Outside investments,"  and  ^'Depreciation";  additions 
under  the  items,  "Federal  tax  reserves,"  "Other  reserves,"  and 
"Estimated  value  of  rented  plants";  and  miscellaneous  changes  in 
inventories  and  other  accounts. 

Table  17. — Deductions  from  and  additions  to  the  investment  as  shown  in  the  original 

company  accounts. 


Investment  shown  by  company  accounts. 


First  of  year 
1913-14. 


End  of  year 
1917-18. 


Deductions  from  investment  originally  shown: 

Good  will,  etc 

Outside  investments 

Depreciation  (increases  in) 

Inventory  adjustments,  etc.  (net) 


Total  deductions. 


Additions  to  Investment  originally  shown: 

Fe  ieral  tax  reserves  i 

Other  reserves ' 

Estimated  value  of  rente  1  plants 

Inventory  adjustments,  etc.  (net) 


Total  additions. 


jnvestment  as  revised  by  the  Commission. 


$46,996,419.60 


4,94<?,206.23 

2,467,925.14 

683,662.39 


8,099,793.76 


554,512.57 

3,854,096.00 

155,545.32 


4,564,153.89 


43,460,779.73 


$69,701,369.46 


4,661,475.00 

6,318,167.36 

5,123,707.76 

814,024.63 


16,917,374.75 


6,744,665.71 
4,805,525.53 
5,194,419.00 


16,744,610.24 


69,528,604.95 


t  Considered  as  appropriated  snrplus. 


T 


^'^^??^^S^^^ 


> 


COSTS,  PRICES,   AND  PBOFITS. 


63 


The  table  shows  practically  $5,000,000  deducted  under  the  head  of 
good  will,  trade-marks,  and  other  intangible  assets.  The  leading 
millers  of  the  country  do  not  set  up  intangible  assets  in  their  accounts. 
The  good  will  shown  above  was  found  in  the  accounts  of  four  mills, 
three  of  minor  importance.  Nearly  three-fourths  of  the  whole 
amount  was  found  in  the  accounts  of  the  other  mill  which  made  no 
pretense  that  it  represented  actual  investment.  The  securities 
issued  in  exchange  for  it  are  labeled  to  that  effect.  This  deduction 
on  account  of  good  will  was  made  because  the  purpose  is  to  establish 
the  investment  necessary  for  the  production  and  distribution  of  flour. 

The  purpose  of  deducting  outside  investments,  the  value  of  which 
increased  from  2  J  to  6i  million  dollars  during  the  five  years,  is 
evident.  The  inquiry  is  concerned  only  with  the  milling  business 
and,  consequently,  an  investment  that  is  partly  milling  and  partly 
something  else  can  not  be  used  satisfactorily.  It  is  worth  noting 
that  the  increase  of  about  $3,850,000  was  in  large  part  invested  in 
United  States  bonds. 

The  failure  by  the  millers  to  establish  reasonable  depreciation 
reserves  has  already  been  noted.  Such  information  as  was  available 
in  regard  to  the  plant  and  equipment  of  the  37  companies  warranted 
an  increase  in  depreciation  reserves  of  considerably  over  $500,000 
at  the  beginning  of  the  period.  A  more  complete  investigation  might 
have  justified  a  still  larger  increase.  During  the  five  years  the  Com- 
mission's changes  increased  the  total  depreciation  reserves  set  up  by 
the  companies  practically  $4,500,000,  resulting  in  a  deduction  of 
$5,123,707.76  from  the  investment  shown  by  the  millers'  own  accounts 
at  the  end  of  the  period. 

The  prevalent  practice  among  the  large  mills  of  throwing  profits 
and  losses  from  one  year  to  another  by  setting  up  estimated  loss  or 
gain  on  unfilled  orders  and  open  trades  in  their  profit  and  loss  accounts, 
and  taking  inventories  at  market  value  instead  of  average  cost,  has 
already  been  referred  to.  (See  p.  55.)  These  incorrect  statements 
of  results  obtained  from  actual  receipts  and  expenditures  within  a 
given  year  have  been  corrected  so  far  as  possible.  The  changes  in 
the  accounts  made  necessary  by  this  practice,  shown  in  the  table  as 
''inventory  adjustments,"  resulted  in  an  addition  of  $155,545.32  to 
the  investment  at  the  beginning  of  the  five-year  period  and  a  sub- 
traction of  $814,024.63  at  its  dose. 

Altogether  the  Commission's  deductions  from  the  investment 
shown  by  the  mill  accounts  at  the  first  of  the  year  191 3^-1 4  amounted 
to  over  8  million  dollars  and  to  17  million  dollars  at  the  end  of  1917-18. 
Additions  to  the  company  investment  at  the  end  of  the  period, 
however,  practically  balanced  deductions,  so  that  total  investment, 
including  good  wiU  as  shown  in  the  original  accounts,  is  only  $175,000 


\ 


5.VJS-?' 


64 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


COSTS,   PRICES,   AND  PROFITS. 


65 


more  than  the  Tm'lling  investment  of  the  37  companies  as  determined 
by  the  Commission. 

The  additions  to  investment  include  the  capitalized  value  of  rented 
mills,  reserves  which,  set  aside  for  provisional  or  contingent  expendi- 
tures, still  continue  to  be  a  part  of  surplus  until  the  expenditures  are 
actually  made'*  and  certain  adjustments  in  inventories.  Their 
rented  mills  are  unquestionably  as  essential  to  the  production  of  the 
flour  sold  by  these  companies  as  are  their  own  mills,  and  the  value  of 
such  mills  necessarily  constitutes  a  part  of  the  capital  employed  in 
the  business. 

The  increase  in  the  amount  of  reserves  disallowed  by  the  Com- 
mission from  half  a  million  dollars  at  the  beginning  of  the  period  to 
Hi  million  dollars  at  its  close  is  a  more  complex  matter.  Here  again, 
as  in  the  case  of  good  will,  the  Concunission  has  no  controversy  with 
the  conservative  business  man  in  regard  to  the  wisdom  of  establishing 
reasonable  surplus  reserves  against  future  contingent  expenditures," 
losses  through  a  declining  market,  or  through  any  unlooked-for 
change  in  factors'  affecting  the  financial  outcome  of  his  business. 
For  example,  the  accumulation  of  funds  for  the  payment  of  cumula- 
tive dividends  on  preferred  stock  is  certainly  a  prudent  if  not  at  times 
a  necessary  operation,  but  these  funds  remain  in  the  business  and 
should  be  continued  in  the  accoimts  as  a  part  of  the  surplus  until 
payment  of  the  dividends  actually  occurs.  Consequently  the  Com- 
mission has  thrown  reserves  of  this  character  back  into  surplus  as 
accumulated  profits.  Other  reserves  treated  in  the  same  way  are 
those  for  contingent  losses  that  may  never  occur,  and  for  prospective 
enterprises  that  may  never  be  undertaken.  The  reserves  of  this 
character  thrown  back  into  surplus  amounted  to  $554,512.57  at  the 
beginning  of  the  period  and  to  $4,805,525.53  at  its  end.  In  other 
words,  while  the  Commission  set  up  about  $4,500,000  in  reserves  to 
provide  adequately  against  depreciation  in  plant  and  equipment,  it 
also  threw  back  into  surplus  a  slightly  larger  amount  in  reserves  that 
could  not  be  justified.  It  will  be  seen  from  the  exact  figures  that  the 
net  effect  of  the  Commission's  revision  of  these  items  was  a  decrease 
of  about  $300,000  in  the  investment  shown  at  the  end  of  1917-18  in 
the  original  accounts. 

In  addition  to  the  items  discussed  in  the  paragraph  above,  many 
of  the  companies  have  in  recent  years  set  up  reserves  for  the  payment 
of  Federal  taxes.  These  reserves  may  not  have  exceeded  the  amount 
of  taxes  thatVere  paid  to  the  Federal  Government  during  the  fol- 
lowing year;  nevertheless,  if  these  deductions  from  investment  had 
been  allowed  to  stand,  the  Commission's  revised  investment  would 


»  Reserves  not  returned  to  surplus  for  addition  to  investment  were  depreciation,  bad  debts,  and  others 
intended  to  offset  an  actual  decrease  in  assets. 


not  have  covered  millions  of  earnings  which  were  actually  retained 
by  the  mills  and  used  in  their  business. 

The  following  table  shows  for  the  37  companies,  and  also  for  the 
three  groups,  the  revised  investment  at  the  beginning  of  each  year, 
1913-14  to  1917-18;  changes  in  this  investment  due  to  operations 
outside  the  milling  business  during  each  year;  and  the  net  increase 
in  the  investment  due  to  mill  earnings  less  distributions  and  other 
justifiable  charges  against  such  earnings: 

Table  IS.— Revised  investment  in  the  milling  business  at  the  beginning  and  end  of  each 
year,  together  ivith  adjustments  because  of  transactions  not  'pertaining  to  the  milling 
business,  and  additions  through  the  mill  earnings  of  the  year,  less  dutrxbutions,  by  years, 
191S-14  to  1917-18. 

[Figures  in  italics  are  to  be  deducted.] 


1913-14 


37  COMPANIES. 

Investment,  beginning  of  j'ear. . . 

Surplus  adjustments  » 

New  investment  * 

Mill  eamiugs  

Distributions  from  mill  earninzs' 
Mill  earnings  retained  in  busi- 
ness   

Investment,  end  of  year 


NORTHWESTERN  GROTJP, 

Investment,  beginning  of  year.. . 

Sur{)lus  adjustments  i 

New  investment  ■ 

Mill  earnings 

Distributions  from  mill  earn- 
ings » 

Mill  earnings  retained  in  busi- 
ness   

Investment,  end  of  year 


1911-15 


$43,460,779.73 

349,992.44 

£99,m-9S 

5,512,163.40 

.5,  lOS,  m-  09 

403.6').5.31 
43,915,042.50 


1915-18 


143,915,042.50 

U5,692.59 

209, 112. 81 

7,974,986.14 

4,m,986.S8 

3,767,999.76 
47,746,462.48 


SOUTHWESTERN  GROUP. 

Investment,  lieginning  of  year . . 

Surplus  adjustments  i 

Nev?  investment  * 

Mill  earnings 

Distributions  from  mill  earn- 
ings » 

Mill  earnings  retained  in  busi- 
ness   

Investment,  end  of  year 


$47,746,462.48 

485,833.13 

62o,Sr,S.50 

6,338,651.23 

5, 193, 168. 09 


SASTKRK  GROUP. 

Investment,  l»eginning  of  year . . , 

Surplus  ad j  ustments  V 

New  investment* 

Mill  earnings 

Distributions  from  mill  earn- 
ings » 

Mill  earnings  retained  in  busi- 
ness  

Investment,  enJ  of  year 


26,708,042.44 

332, 280. 94 

51,708.49 

3,679,019.16 

4,JS6,0^.04 

V,!,  023. 88 
26, 635, 007.  W 


6,178,579.31 

16,958.60 

62,  ??J.  J,7 

709,089.80 

$97,477.22 

311,612.58 
6,408,499.82 


10,574,157.98 

3C,670. 10 

288,400.00 

1,124,054.44 

674,947.83 

549, 106. 61 
10, 871, 534. 69 


1916-17 


$48,750,825.2') 

629,994.46 

532,000.91 

20,517,569.45 

7,206,211.45 


l,]4l,89.3.  U!  13,261,358.00 
48, 7V),  825. 25  62, 015, 089. 70 


26,635,007.99 

200,847.20. 

141,581.75 

6,401,004.41 

2,925,204.56 

2,  A75, 799.  85 
29,051,545.39 


6,408.499.82 

25,211.62 

153,428.06 

1,455,141.41 

641,965.2b 

913,186.15 
7,500,325  65 


10,871,534.69 

29,942.99 

85,900.00 

1,118,840.32 

739, 8^.  56 

379,013.76 
11,194,591.44 


29,051,545.39 
475, 798. 80 
26ii,68ii.82 


29,989,239.41 

JtS0.5t8.43 
433;  075. 90 


1917-18 


«G2.015,089.70 

*  9,838,932.  li 

391,307.06 

22,440,85,8.36 

12,479,718.06 

9,%1,140.30 
69,  .528, 604. 95 


4.647,172.56  15,212,647.98 


8,922,593.7? 

724,578.84 
29,989,239.41 


7,500,325.65 

40,787.61 

102. 155. 12 

977,248.29 

606,338.89 

471,009.40 
8,114,277.78 


11,194,591.44 

30,758.28 
460,885.00 
714,230.38 

764,925.48 

60,695.10 
10,647,308.06 


6,797,668.56 

9,415,089.42 
o9, 356, 886. 30 


8,114,277.78 

10,581.03 

139, 825. 01 

2,987,187.21 

757, 150. 28 

2,230,036.93 
10,473,558.69 


39,356,886.30 

U,S79,Wi£9 

290, 150.  45 

13,51.8,744.14 

8,601,572.0* 

5,017,172.12 
43,285,404.58 


10,473,558.69 

♦  472, 107. 4S 

287,  S.56. 61 

5,019,603.13 

t,  192,946. 69 

2,826,656.54 
13,115,464.42 


10,647,308.06 

38,895.00 

40,000.00 

2,317,734.26 

701,502.61 

1,616,231.65 
12,184,644.71 


12.184,644.71 

*  987,220.  j^ 

187,000.00 

3,902,511.09 

1, 785, 199. 45 

2,117,311.64 
13,127,735.95 


1  The  net  amount  of  charges  and  credits  in  the  original  account.",,  arising  from  transactions  ihat  can  not 
Justifiably  be  considered  as  belonging  to  tV  milling  biisiness  of  the  year.  .....  .     ..u 

1  Net  change  through  the  sale  and  redemption  of  corDoracion  securities,  and  the  contributions  and  with- 
drawals of  individual  proprietors.    The  contributions  ani  withdrawals  were  insignincant  m  amount. 

•  These  distributions  include  dividends,  boad  interest.  Federal  taxes,  and  rents.  The  amount  sho^^•n  m 
the  table  is  a  net  figure  obtained  by  deducting  from  the  total  of  such  distributions  all  income  from  outside 
sources.  ,         ,  ^  ^ ,      ^ 

4  The  increase  shown  is  largely  the  result  of  the  purchase  of  Government  bonds, 

183256°— 20 5 


A 


w^fms^pf^^'^p^^^ 


66 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


COSTS,  PRICES,   AND  PROFITS. 


67 


Table  18  shows  only  the  investment  in  the  milling  business  of  these 
concerns.  This  includes,  of  course,  their  investments  in  subsidiary 
enterprises,  such  as  grain  elevators  operated  primarily  for  the  purpose 
of  securing  a  reUable  steady  supply  of  a  desired  quahty  of  wheat  at 
the  lowest  possible  cost,  and  branch  houses  maintained  at  a  distance 
from  the  mill  for  the  purpose  of  securing  as  satisfactory  and  as  profit- 
able a  distribution  of  the  mill  products  as  is  possible. 

On  the  other  hand,  it  does  not  include  as  milling  investment  a 
small  part  of  the  surplus  of  these  concerns,  which  has  been  invested  in 
the  securities  of  other  enterprises.  Liberty  bonds,  etc.  The  amounts 
thus  invested  have  been  considered  as  incidentally  held  subject  to 
conversion  into  cash  and  distribution  in  dividends  at  the  pleasure 
of  each  concern,  and,  therefore,  not  really  a  part  of  the  investment 
in  the  milling  business  itself. 

Starting  with  $43,460,779.73  at  the  beginning  of  1913-14,  the 
37  companies  increased  their  investment  to  $69,528,604.95  at  the 
end  of  1917-18.  In  spite  of  this  increase  in  investment,  their  sales 
had  fallen  off  from  38,450,000  barrels  of  flour  in  the  first  year  to 
34,659,000  barrels  in  the  last.  As  already  noted,  however,  their 
production  of  rye,  com,  and  other  cereal  products  had  increased  as 
much  as  their  production  of  wheat  flour  had  fallen  off.     (See  p.  59.) 

The  net  addition  to  their  investment  through  sale  and  redemption 
of  their  own  securities  during  the  five  years  was  only  $200,000.^ 
During  the  first  three  years,  while  as  yet  the  war  had  apparently 
had  but  slight  effect  on  the  situation,  they  were  able  to  increase 
investment  out  of  earnings  by  $5,000,000  and  at  the  same  time  make 
a  net  reduction  of  over  $700,000  in  their  outstanding  securities. 
During  the  two  critical  years  of  the  war  which  followed,  they  re- 
tained in  the  business  over  $23,000,000  of  earnings.  In  addition 
investment  was  increased  by  the  sale  of  their  own  securities  in  excess 
of  retirement  to  the  amount  of  $900,000.  This,  however,  was  not 
for  use  in  their  milling  business,  for  not  only  the  $900,000  secured 
by  selling  their  own  securities  but  also  some  2i  million  dollars  taken 
out  of  earnings  were  invested  in  Government  bonds.  This  increase 
in  their  holdings  of  Federal  securities  was  largely  responsible  for  the 
deduction  of  $2,838,932.11  from  investment  in  order  to  get  the  true 
miUing  investment  at  the  end  of  the  year  1917-18. 

The  mill  earnings  beginning  with  5i  million  dollars  for  the  first 
year  increased  to  over  $22,000,000  (four  times  as  much)  in  1917-18. 
(See  note  p.  9.)  According  to  the  United  States  Census  Bureau 
1913  -14  was  not  a  good  year  in  the  milling  business,  but  these  mills, 
even  in  that  year,  earned  over  12  per  cent  on  their  average  invest- 
ment.  The  $7,974,986.14  earned  in  1914-15  was  more  than  15  per 

"This  does  not,  of  course,  include  $3,900,000  transferred  from  surplus  to  capital  stock  through  the 
distribution  of  stock  in  dividends,  which  added  nothing  to  total  investment. 


cent  on  investment,  but  the  abundant  supply  of  flour  in  1915-16 
showed  its  natural  consequence  in  the  decreased  earnings  of  that 
year,  which  were  practically  at  the  same  rate  as  in  1913-14.  To 
'make  clear  the  principal  cause  of  the  decreased  earnings  in  1915-16 
it  is  only  necessary  to  say  that  flour  that  sold  for  more  than  $7  in 
February,  1915,  sold  for  less  than  $5  in  four  out  of  the  twelve  months 

of  1915-16.«^ 

The  mills  went  into  the  year  1916-17  with  good  supplies  of  low- 
cost  goods  in  their  inventories.  As  early  as  August,  1 91G,  the  known 
great  decrease  in  the  supply  of  wheat  had  caused  the  wholesale  prices 
of  flour  to  advance  40  to  50  per  cent  above  the  level  in  June,  1915.*^ 
This  advance  in  prices  did  not  halt  appreciably,  except  for  a  short 
time  near  the  close  of  the  year  1916,  when  peace  rumors  were  preva- 
lent, until  in  May,  1917,  when  the  prevailing  price  was  from  190  to 
200  per  cent  above  that  in  the  preceding  June.  Prices  of  wheat 
moved  parallel  to  those  of  flour,  but  the  holdover  from  the  big  crop 
of  1915  and  other  favorable  circumstances  enabled  the  37  companies 
to  make  large  increases  in  the  margin  between  wheat  cost  and  flour 
receipts  per  barrel. 

The  result  of  the  milling  situation  briefly  suggested  in  the  preceding 
paragraph  was  a  threefold  increase  in  the  profits  realized  in  1916-17 
over  those  of  the  preceding  year.  Indeed  the  rate  of  return  on  invest- 
ment was  three  times  what  it  had  been  for  the  two  years  1913-14 
and  1915-16,  in  spite  of  the  larger  investment  required  by  advancing 
prices  and  a  considerable  decrease  in  the  volume  of  business. 

Government  intervention  became  imperative  in  1917.  Prices  of 
wheat  were  stabilized  and  the  profits  of  millers  were  to  some  extent 
standardized.  Mills  frequently  made  more  than  the  standardized 
profits,  however,  in  order  to  insure  themselves  against  possible  losses 
toward  the  end  of  the  year.  There  was  practically  no  limit  to  the 
profit  on  flour  except  the  Government  restrictions  since  substitutes 
such  as  corn  meal  and  rye  and  barley  flours  were  being  forced  upon 
the  consumers,  and  the  prices  paid  had  little  influence  with  pur- 
chasers if  they  could  find  anyone  who  would  sell  them  wheat  flour. 
Furthermore,  the  profit  of  $22,000,000  shown  for  1917-18  does  not 
fully  represent  the  wider  margin  actually  paid  by  the  consumers 
who  purchased  flour  in  the  commercial  flour  markets  of  the  United 
States  that  year.  It  became  plainly  evident  toward  the  close  of 
the  year  that  no  reversal  in  general  market  conditions  was  possible. 
Consequently,  shortly  before  the  close  of  the  period  during  which  the 
standardized  profit  was  in  force,  some  of  the  mills,  realizing  that  their 
average  profits  would  otherwise  exceed  greatly  the  standard  agreed 
upon,  made  sales  direct  to  the  Government  at  less  than  cost.  Cir- 
cumstances have  not  permitted  the  Conunission  to  investigate  the 
full  effect  of  this  policy. 

w  The  Northwestern  Miller,  Oct.  1, 1919,  p.  58. 


f--^t^>7«lfr>?i* 


68 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


It  will  be  noted  that  the  net  increase  in  milling  investment  during 
the  five  years  shown  in  Table  IS  (see  also  Table  19,  p.  69)  was  less 
than  the  amount  shown  under  the  item  "Mill  earnings  retained  in 
in  the  business."  This  is  due  to  the  fact  that  part  of  these  earnings 
were  used  in  the  purchase  of  stock  in  outside  enterprises,  Government 
bonds,  etc.,  the  remainder  representing  the  net  addition  to  the  invest- 
ment as  it  stood  at  the  beginning  of  the  year  1913-14. 

The  revised  investment  at  the  beginning  of  1913-14  and  at  the 
end  of  1917-18  is  shown  below,  together  with  the  per  cent  of  increase 
during  the  period: 


37  companies 

Northwestern  group 
Southwestern  group 
Eastern  group 


1913-14 


$43.4r>0.780 

26.708,042 

6. 178. 579 

10,574,158 


1917-18 


$69,528,605 
43. 285.405 
13,115.464 
13,127,736 


Increase. 


Per  cent. 

60 

62 

112 

24 


These  increases  absorbed  less  than  half  of  the  mill  earnings  shown 
below,  except  in  the  case  of  the  Southwestern  group: 


37  companies 

Northwestern  group . 
Southwestern  group . 
Eastern  group 


Amount  of 
earnings.  • 


$62,784,228.58 

42,458.588.25 

11,148,269.84 

9,177,370.49 


Per  cent 
on  origi- 
nal in- 
vestment. 


144 

159 

180 

87 


Average 
annual 
rate  on 
invest- 
ment.! 


Per  cent. 
22.5 
24.4 
235 
15.8 


1  Mean  between  the  investment  at  the  beginning  and  end  of  the  period.    Rates  computed  as  explained 
under  Table  20  on  page  72. 

Payments   out   of   these   earnings   to  stockholders,   bondholders, 
rented-mill  owners,  and  on  account  to  Federal  taxes  are  shown  below: 


37  companies 

Northwestern  group. 
Southwestern  group . 
Eastern  group 


;V  mount  of 
distributions. 


« $34, 245, 142. 07 

25,282,971.90 

4,395,768.24 

4,566,401.93 


Per  cent 

on 
orieinal 
invest- 
ment. 


79 
95 
71 
43 


Average 
annual 
rate  on 
invest- 
ment.» 


Per  cent. 
12.1 
14.4 
9.1 

7.7 


1  Mean  between  the  investment  at  the  beginning  and  end  of  the  period. 

*  Payments  of  Federal  taxes  included  in  these  distributions  amounted  to  $5,524,883.77. 

In  addition  to  these  distributions  nearly  $4,000,000  of  mill  earn- 
ings were  transferred  to  outside  investments. 

To  get  the  full  significance  of  the  above  tables,  assume  that  a  man 
had  a  million-dollar  investment  covering  all  forms  of  capital  included 


COSTS,   PRICES,   AND  PROFITS. 


69 


in  the  $43,460,780  investment  of  the  37  companies  at  the  beginning 
of  1913-14,  and  a  corresponding  investment  in  the  mills  of  the  dif- 
ferent groups.  The  table  below  shows  the  results  that  would  have 
been  realized  on  such  investments  during  the  five-year  period: 


37  companies 

Northwestern  proup. 
Southwestern  group. 
Eastern  group 


Original 
investment. 


$1,000,000 
1,000,000 
1,000,000 
1,000,000 


Earnings  in 
five  years. 


$1,440,000 

1,590,000 

1,800,000 

870,000 


Withdrawn 
during 

five 
years. 1 


$840,000 
970,000 
680,000 
630,000 


Milling 

investment 

at  end  of 

period. 


$1,600,000 
1,620.000 
2,120,000 
1,240,000 


1  This  includes  a  proportionate  part  of  Federal  tax  payments  and  additions  to  outside  investments. 

For  the  purpose  of  more  effective  comparison  the  financial  results 
obtained  by  the  37  companies  during  the  five-year  period  are  sum- 
marized below  according  to  the  original  accounts  and  also  according 
to  the  accounts  as  revised  by  the  Commission: 

Table  19. — Comparison  of  the  results  of  mill  operation  and  of  investment  items  as  shown 
in  the  original  accounts  and  in  the  Commission's  revised  statements. 

(Figures  in  italics  are  to  be  deducted.] 

Financial  results  shown  by  original  accounts: 

Investment,'  beginning  of  1913-14 $46,996,419.60 

Net  increase  in  securities  outstanding 3,  793, 382.  30 

Outside  income 1,  720, 492.  88 

Milling  income 47,  876,  696.  98 

Total  income 53,  390, 572. 16 

Dividends  paid 30,  685,  622.  SO 

Net  increase  in  investment \ 22,  704,  949.  86 

N^    Investment,'  end  of  1917-18 69,701,369.46 

Financial  results  shown  by  revised  accounts: 

Investment,'  beginning  of  1913-14 43, 460,  779.  73 

Adjustments f ,  678,  793.  59 

New  investment 207, 532.  30 

Mill  earnings 62,  784,  228.  58 

Distribution  from  mill  earnings 34-,  245, 142  (H 

Mill  earnings  retained  in  business 28,  539, 0«6.  51 

Investment,'  end  of  1917-18 69,  528,  604.  95 

These  tables  are  not  easily  comparable,  as  the  purpose  of  the  first 
is  to  show  results  for  the  entire  business  of  the  companies,  and  that  of 
the  second  is  to  show  results  for  their  milling  business  only.  For 
this  reason  the  amount  of  outside  income  is  shown  in  the  upper  part 
of  the  table  and  not  in  the  lower.  Furthermore,  in  the  lower  part  of 
the  table,  in  addition  to  excluding  investment  in  outside  securities 
from  the  revised  investment,  the  Commission  has  included  the  esti- 
mated value  of  rented  plants.     (See  p.  64.) 

The  difference  between  the  item  of  "Net  increase  in  securities 
outstanding"  in  the  upper  part  of  the  table  and  the  item  ''New  in- 
vestment" in  the  lower  part  is  largely  due  to  the  exclusion  of  stock 
dividends  from  new  investments.     They  constituted  an  addition  to 

1  Includes  stocl^,  bonds,  and  surplus. 


70 


COMMEBCIAL  WHEAT-FLOUB  MILLING. 


stock  outstanding  and  a  corresponding  deduction  from  surplus  but 
added  nothing  to  investment.  The  Conmiission  includes  in  its  new 
investments  a  "fSOjOOO  estimated  increase  in  the  value  of  rented  plants 
during  the  live  years,  which  was  due  to  changes  in  the  buildings 
themselves  and  not  to  reappraisals. 

Receipts  and  expenditures  not  really  a  part  of  the  milling  busi- 
ness, which  resulted  in  a  net  charge  against  income  of  about  $2,700,000, 
are  brought  together  under  the  item  ''Adjustments"  in  the  lower  part 
of  the  table.  These  adjustments  include  deductions  from  the  in- 
vestment as  it  stood  (after  revision)  at  the  beginning  of  the  period 
as  follows:  (1)  About  $3,850,000  paid  out  for  outside  investments 
(see  p.  66);  (2)  about  $150,000  in  miscellaneous  items  which  the 
Commission  rejected  as  unwarranted  charges  against  milling  opera- 
tions, and,  therefore,  deducted  from  investment  just  as  regular 
dividends  are  deducted;  and  (3)  about  $200,000  added  directly  to 
investment  in  the  original  accounts  by  means  of  appraisals  which 
were  rejected  by  the  Commission. 

The  adjustments  also  include  direct  additions  to  investment  by 
the  Commission,  because  of  reserves  taken  out  of  investment  as 
shown  on  the  books,  for  a  variety  of  contingencies  such  as  those 
enumerated  on  page  64,  amounting  to  about  $1 ,500,000.  Apparently 
these  reserves  had  been  set  up  without  corresponding  charges  to 
operations,  or  to  income,  and  since  this  prevented  throwing  them 
back  into  earnings,  it  was  necessary  to  return  them  directly  to  in- 
vestment. With  complete  records  and  an  exhaustive  investigation 
practically  all  of  this  $1,500,000  might  have  been  shown  to  be  a 
part  of  earnings,  but  the  general  results  obtained  from  the  inquiry 
would  not  be  materially  changed. 

In  the  upper  part  of  the  table  the  original  accounts  show  that  the 
mill  earnings  of  the  37  companias  during  the  five  years  amounted 
to  $47,876,696.98.  In  sharp  contrast  with  this  the  lower  part  of 
the  table  shows  mill  earnings  amounting  to  $62,784,228.58.  On 
examination,  however,  this  increase  of  $14,907,531.50,  or  over  30 
per  cent,  is  found  to  involve  differences  as  to  classification  to  a 
greater  extent  than  questions  as  to  the  actual  facts  in  the  case. 

In  obtaining  the  statement  of  mill  earnings  found  in  the  upper  part 
of  the  table,  $11,774,659.10  was  deducted  as  a  provision  for  Federal 
income  and  excess-profit  taxes. 

The  directors  of  the  37  companies,  whose  accounts  were  used  in  the 
preparation  of  this  table,  did  not  look  upon  bondholders  or  owners 
of  rented  plants  as  investors  in  wheat-flour  milling.  As  a  natural 
consequence  they  added  bond  interest  and,  naturally,  rent  paid,  to 
their  other  expenses.  But,  since  in  this  report  bonds  outstanding 
and  the  estimated  value  of  rentod  plants  have  been  included  in  the 
investment  accounts  of  the  37  companies,  payments  of  bond  interest 


COSTS,  PRICES,  AND  PROFITS.  71 

and  rent  necessarily  become  a  part  of  the  net  income  twed  in  deter- 
mining the  rate  of  return  on  investment.  The  rents  thus  added  to 
net  income  amounted  to  $3,589,089.31,  and  the  bond  interest  to 
$1,416,114.36. 

These  three  items — Federal  taxes,  rentals,  and  bond  interest — 
amounted  to  $16,779,862.77  during  the  period  covered  by  this  table. 
Since  the  net  difference  between  mill  earnings  in  the  two  tables  was 
only  $14,900,000,  it  is  evident  that  the  other  changes  made  by  the 
Commission  reduced  the  earnings  shown  by  the  companies'  own 
accounts  by  about  $1,900,000. 

The  more  important  changes  made  by  the  Commission  that  tended 
to  reduce  mill  earnings  were  as  follows: 

Increase  in  depreciation .* $3, 235, 778.  38 

Disallowing  estimated  profit  on  unfilled  orders,  etc - 228, 15.5. 10 

Reducing  inventories  taken  at  market  price 741, 414.  85 

Disallowing  increases  of  investment  by  reappraisals 1, 029, 984.  79 

5, 226. 33a  12 

On  the  other  hand,  the  Commission  threw  back  into  earnings  con- 
tingent reserves  discussed  on  page  64  to  the  amount  of  $3,249,673.14 
and  disallowed  small  miscellaneous  charges  amounting  to  $113,330.31. 
The  total  of  these  two  credit  items,  namely,  $3,363  003.95,  sub- 
tracted from  the  $5,200,000  in  debit  items  listed  above,  approximate 
the  $1,900,000  reduction  in  earnings  referred  to  in  the  preceding 
paragraph. 

While  the  upper  part  of  the  table  on  page  69  gives  the  amount  of 
dividends  paid  by  the  37  companies  as  $30,685,600,  the  lower  part 
of  the  table  shows  a  distribution  of  mill  earnings  amounting  to 
$34,245,142.07.  Stock  dividends  amounting  to  $3,900,000  included 
in  the  $30,685,600  were  excluded  from  the  Commission's  distribution 
figures,  because  the  earnings  were  not  actually  distributed  but  were 
retained  in  the  business.  It  was  assumed  further  that  the  $1,700,000 
income  from  outside  investment  was  all  distributed  to  the  stock- 
holders as  a  part  of  dividends  paid,  with  the  consequence  that  that 
amount  was  necessarily  deducted  from  actual  cash  distributions  in 
order  to  obtain  the  distribution  from  mill  earnings.  On  the  other 
hand,  as  already  noted,  the  $5,500,000  paid  out  as  Federal  taxes  was 
included  in  distributions  from  net  income.  Bond  interest  amountins: 
to  $1,400,000  and  rent  amounting  to  $2,300,000  were  treated  in  the 
same  way.  These  three  items  added  $9,200,000  to  distribution 
while  the  deductions  noted  above  amounted  to  $5,600,000,  giving  a 
net  difference  of  $3,600,000  between  dividends  as  shown  in  the 
original  accounts  and  distributions  from  mill  earnings  according  to 
the  revised  figures. 

That  the  original  accoimts  should  show  only  $22,704,949.86  added 
to  total  investment,  while  the  Commission's  revisions  show  that 


■T*^*>5*f^<»**p"i!«»*fr: 


■4^:. 


r  ■>^.y       *',•' 


mtm 


■A 


72 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


COSTS,  PRICES,  AND  PROFITS. 


7S 


S28,539,086.51  of  mill  earnings  were  retained  in  the  milling  business 
is  the  not  result  of  the  foregoing  changes  in  the  operating  and 
investment  accounts. 

Table  18  shows  new  investments  during  the  five  years  for  the 
Northwestern  and  also  for  the  Southwestern  group.  In  neither  case, 
however,  was  the  amount  of  these  new  investments  nearly  so  large 
as  the  amount  of  money  put  into  outside  enterprises.  In  the  case 
of  the  Eastern  group,  redemption  of  company  securities  exceeded 
their  sale  in  every  year  of  the  five. 

Comparison  between  the  earnings  of  the  different  groups  shows 
that  the  earnings  of  the  Northwestern  group  varied  from  about  twice 
to  about  three  times  those  of  the  other  two  groups  combined,  except 
in  1917-18  when  the  amount  was  only  one  and  one-half  times  the 
aggregate  for  the  other  groups. 

Section  7.  Rate  of  return  on  investment. 

The  following  table  shows  the  average  investment  and  the  rate  of 
return  realized  on  it  for  the  37  companies  and  each  of  the  groups  by 
years  from  1913-14  to  1917-18: 

Table  20. — Investment  and  rate  of  return  on  investment,  by  groups  and  by  years,  1913-14 

to  1917-18. 


■ 

37  companies. 

Northwestern  group. 

Southwestern  group. 

Eastern  group. 

Year. 

Investment. 

Per 
cent  of 
profit. 

Investment. 

Per 

centol 
profit. 

Investment. 

Per 

cent  of 
profit. 

Investment. 

Per 
cent  of 
profit. 

1913-14 

1914-15 

1915-16 

1916-17 

1917-18 

$43,687,911.12 
45, 831, 752. 49 
48,248,643.87 
65,382,957.48 
65,771,847.33 

12.6 
17.2 
13.1 
38.4 
34.1 

$26,671,525.22 
27,843,276.69 
29,520,392.40 
34,673,062.86 
41,321,145.44 

13.8 
19.4 
15.7 
44.7 
32.7 

$6,293,539.56 
6,9-14,412.73 
7,807,311.72 
9,293,918.23 

11,794,511.56 

11.3 
20.9 
12.5 
34.2 
42.6 

$10,722,846.34 
11,033,063.07 
10,920,949.75 
11,415,976.39 
12,656,190.33 

10.5 

9.1 

6.5 

22.8 

30.8 

The  average  investment  shown  in  Table  20  is  the  mean  between 
the  investment  at  the  beginning  and  at  the  end  of  the  year.  The 
method  of  determining  these  investments  has  been  discussed  in  the 
preceding  section. 

The  amounts  of  profit  used  in  computing  the  respective  rates  shown 
in  Table  20  arc  the  corresponding  mill  earnings  shown  in  Table  18, 
except  that  for  a  few  companies,  where  Table  18  shows  net  earnings 
for  more  or  less  than  the  year,  the  accounts  have  been  put  on  an 
annual  basis.  They  include  all  profits  incidental  to  the  business  of 
making  and  distributing  wheat  flour  as  carried  on  by  the  37  com- 
panies. For  example,  any  profits  or  losses  made  on  barley  or  rye 
flour  in  1917-18  were  included  with  the  profits  on  wheat  flour  in 
computing  the  rates  shown  in  the  table.  Two  reasons  made  this 
method  of  treating  profits  advisable.  First,  it  appeared  probable 
that  most  of  the  business  in  coarse-grain  products  used  as  substitutes 


for  wheat  flour  was  of  a  temporary  character  and  that  the  mills 
would  largely  discontinue  it  on  the  return  of  normal  conditions. 
Second,  it  was  carried  on  to  a  large  extent  with  the  same  plant  and 
equipment  that  had  previously  been  used  in  the  wheat-flour  business, 
and  the  records  furnished  no  really  satisfactory  means  of  dividing 
investment  or  operating  accounts  between  the  wheat-flour  business 
and  the  business  in  substitutes.^® 

As  already  noted,  according  to  the  Bureau  of  the  Census,  1913-14 
was  not  a  good  year  in  the  milling  business.  Such  general  information 
as  the  Commission  had  obtained  concerning  milling  conditions  for 
several  years  prior  to  1913-14  as  well  as  definite  information  obtained 
from  a  number  of  mills  in  regard  to  conditions  in  1912-13  indicates 
that  the  period  of  relative  depression  in  the  milling  industry  covered 
a  number  of  years  prior  to  1913-14.  Nevertheless,  the  37  companies 
were  doing  a  very  satisfactory  business  in  1913-14  and  the  North- 
western group  had  apparently  been  even  more  prosperous  the  year 
before. 

The  table  shows  that  in  round  numbers  the  aggregate  average 
investment  of  the  37  companies  in  1913-14  amounted  to  $44,000,000 
and  that  in  1917-18  it  had  increased  to  $66,000,000.  This  increase 
of  50  per  cent  is,  of  course,  somewhat  less  than  the  increase  of  invest- 
ment from  the  beginning  of  the  year  1913-14  to  the  end  of  the 
year  1917-18,  which  has  already  been  discussed  in  section  6. 

In  spite  of  the  reputed  poor  business  conditions  for  the  milling 
industry  in  1913-14  the  37  companies  realized  a  profit  of  12.6  per 
cent  on  their  investment.  Under  the  stimulus  to  business  due  to  the 
opening  of  tlie  war  in  1914-15,  which  was  accompanied  by  an  export 
of  wheat  and  flour  which  advanced  prices  rapidly,  profits  in  that  year 
were  increased  to  17.2  per  cent.  In  1915-16  with  an  unparaUeled 
supply  of  wheat  and  flour  in  the  United  States  the  demand  from 
Europe  also  fell  off  very  greatly.  Apparently,  in  consequence  of 
this  change  from  the  situation  in  1914-15,  the  average  profit  of  the 
37  companies  dropped  to  13.1  per  cent.  These  conditions  were  aU 
reversed  before  the  end  of  1916-17.  Indeed,  throughout  most  of  the 
latter  half  of  that  year  there  appeared  to  be  no  limit  on  the  price  that 
purchasers  were  willing  to  pay  for  flour.  The  natural  result  was  an 
increase  in  the  profit  of  the  37  companies  during  1916-17  to  38.4  per 
cent. 

Conditions  of  scarcity  continued  throughout  1917-18.  The 
stabilization  of  the  price  of  wheat  through  Government  regulation 
and  the  agreement  in  regard  to  millers'  margin  of  profit  had  their 
effect  on  the  situation.  Nevertheless,  Table  20  shows  that  the  37 
companies  realized  a  profit  of  34.1   per  cent  in  that  year.     It  has 

*  See  p.  79  for  approximate  segregation  of  coarse-grain  operating  receipts  and  expenditures  in  1917-12. 


J 


'■.:.' ^^..tr -J. 


74 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


already  been  noted  that  this  rate  of  return  does  not  fully  represent 
the  profit  realized  on  their  sales  to  the  public. 
I  The  average  investment  used  by  the  Northwestern  group  amounted 
^to  $26,700,000  in  1913-14  and  increased  to  $41,300,000  in  1917-18. 
In  other  words,  the  investment  of  the  Northwestern  group  consti- 
tuted over  60  per  cent  of  the  total  investment  of  the  37  companies. 
During  the  ^ve  years  it  increased  slightly  more  than  50  per  cent 
while  the  investment  of  the  Southwestern  group  almost  doubled, 
and  that  of  the  Eastern  group  increased  less  than  20  per  cent. 

In  1913-14  the  Northwestern  group  reahzed  a  profit  of  13.8  per 
cent  on  its  average  investment;  in  1914-15,  19.4  per  cent.  Two 
years  later  in  1916-17  its  profit  was  44.7  per  cent,  over  three  times 
the  rate  in  1913-14  and  considerably  over  twice  the  rate  in  1914-15. 
In  1915-16  the  profit  of  this  group  had  decreased  to  15.7  per  cent, 
but  this  decrease  had  been  accompanied  by  an  increase  in  its  sales 
from  25,090,000  barrels  of  flour  to  30,364,000  barrels.  This  large 
increase  in  the  sales  of  the  Northwestern  group  was  made  during 
a  year  in  which  the  Southwestern  group  increased  its  sales  less  than 
5  per  cent,  and  the  Eastern  group  actually  lost  business.  Again,  in 
1917-18,  the  profit  of  the  Northwestern  group  decreased — dropping 
back  to  32.7  per  cent.  During  the  two  high-profit  years  the  sales  of 
the  group  averaged  only  about  24  miDion  barrels  annually. 

The  average  investment  of  the  Southewstem  group  increased  from 
$6,300,000  in  1913-14  to  $11,800,000  in  1917-18.  Earnings  of  this 
group  were  at  the  rate  of  11.3  per  cent  in  1913-14,  but  increased 
under  the  change  in  conditions  because  of  the  European  war  to 
20.9  per  cent  in  1914-15.  It  wiU  be  noted  that  the  increase  in  rate 
of  return  on  investment  was  somewhat  larger  for  the  Southwestern 
group  in  this  year  than  for  the  Northwestern.  A  probable  explana- 
tion for  this  difference  is  found  in  the  fact  that  the  hard  spring  wheat 
crop  of  1914  fell  off  sharply  both  in  quantity  and  quality.  (See 
Exhibit  VI.)  In  1915-16  the  rate  of  profit  realized  for  the  South- 
western group  dropped  to  12.5  per  cent — that  is,  conditions  for  the 
two  groups  reversed  themselves.  The  decrease  in  profit  for  the 
Southwestern  in  1915-16  being  considerably  more  than  for  the 
Northwestern.  The  greater  relative  prosperity  of  the  Northwestern 
group  in  1915-16  was  without  doubt  due  to  the  large  crop  of  excellent 
hard  spring  wheat.  Profits  of  the  Southwestern  group  may  have 
been  affected,  however,  by  the  poor  quality  and  excess  moisture 
content  of  the  winter  wheat  crop  raised  in  1915. 

The  profits  of  the  Southwestern  group  in  1916-17  show  the  effect 
of  the  great  scarcity  of  flour  and  the  heavy  European  demand  for  it 
in  that  year — the  rate  of  return  realized  by  the  group  increasing  to 
34.2  per  cent.  This  was  an  advance  of  175  per  cent  over  the  12.5 
per  cent  realized  in  1915-16.     In  spite  of  the  very  great  increase  in 


COSTS,  PRICES,  AND  PROFITS. 


75 


its  investment,  the  Southwestern  group  was  able  to  increase  the  rate 
of  return  realized  on  it  to  42.6  per  cent  in  1917-18. 

It  wiU  be  noted  that  the  profit  of  the  Southwestern  group  in 
1917-18  (42.6  per  cent)  was  practically  10  per  cent  in  excess  of  the 
32.7  per  cent  shown  for  the  Northwestern  gi'oup  in  the  same  year. 
As  a  matter  of  fact,  it  is  not  positively  established  that  the  South- 
western group  has  sold  flour  to  the  trade  at  a  higher  profit  than  that 
of  the  Northwestern  group.  Two  causes  were  responsible  for  the 
difference  shown  in  the  table.  The  Northwestern  group  sold  a  larger 
quantity  of  flour  to  the  Government  below  cost  toward  the  close  of 
1917-18  than  the  Southwestern.  Furthermore,  the  mill  year  of  the 
Northwestern  group  runs  through  July  and  August,  while  that  of 
the  Southwestern  ends  in  June.  As  a  result  of  this  difference  in  the 
years,  the  business  of  the  Northwestern  group  in  1916-17  extended 
two  months  further  than  that  of  the  Southwestern  into  the  high- 
price  period  resulting  from  the  wheat  and  flour  panic  of  the  spring 
of  1917.  These  two  profitable  months  were,  of  course,  included  in 
the  Southwestern's  mill  year,  1917-18,  and  unquestionably  had  their 
effect  on  the  high  rate  of  profit  realized  by  that  group.  If  the  two 
years,  1916-17  and  1917-18,  are  thrown  together,  this  peculiar  effect 
of  the  difference  in  the  mill  years  of  the  two  groups  is  neutralized. 
Consequently  a  simple  average  of  their  rates  of  profit  for  the  two 
years  gives  approximately  the  same  figure. 

Rates  of  profits  realized  by  the  Eastern  group  during  the  five-year 
period  are  strikingly  in  contrast  with  those  realized  by  the  other  two 
groups.  As  might  be  expected  from  the  lower  rate  of  return,  the 
investment  shows  no  such  increase  for  this  group  as  for  the  other  two. 
In  1913-14  it  amounted  to  $10,700,000,  and  even  imder  the  extraordi- 
nary stimulus  of  war  conditions  it  increased  by  less  than  $2,000,000 
during  this  period. 

Taking  into  account  aU  information  available,  it  appears  quite 
probable  that  the  year  1913-14  was  a  comparatively  profitable  year 
for  the  Eastern  group,  although  the  rate  of  return  on  its  investment 
for  that  year,  shown  in  the  table  (p.  72)  was  only  10.5  per  cent 
Under  the  stimulus  of  an  increased  supply  of  wheat  through  the 
eastern  part  of  the  country,  this  group  increased  its  sales  over  15 
per  cent,  but  the  rate  of  profit,  for  causes  which  are  not  apparent, 
fell  to  9.1  per  cent  in  1914-15  and  even  lower  in  the  succeeding  year. 
The  rate  realized  in  1916-17  was  22.8  per  cent  or  but  little  over  half 
that  realized  by  the  Northwestern  group.  In  1917-18  the  effect  of  an 
apparently  unlimited  demand  for  flour  at  any  price  resulted  in  an 
advance  of  the  rate  for  the  Eastern  group  to  30.8  per  cent. 


76 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


Section  8.  Sales  and  profit  on  sales. 

The  following  tabic  shows  the  amount  of  flour  sales  and  the  rate  of 
profit  on  such  sales  for  the  37  companies  and  also  for  each  group, 
year  by  year,  during  the  five-year  period  covered  by  this  report: 

Table  21. —Sales  and  per  cmt  of  profit  on  sales,  by  groups  and  by  years,  1913-14  to 

1917- 18. 


37  companies. 

Northwestern  group. 

Southwestern  group. 

Eastern  group. 

Year. 

Flour  sales. 

Per 

cent 

of 

profit. 

Flour  sales. 

Per 

cent 

of 

profit. 

Flour  sales. 

Per 

cent 

of 

profit. 

Flour  sales. 

Per 

cent 

of 

profit. 

1913-14 

1914-15 

19hV16 

1916-17 

1917-18 

$159,656,875.41 
212,058,742.22 
227,9<i9,626.22 
314.316.579.54 
354,192,286.93 

3.4 
3.7 
2.7 
6.5 
5.3 

$112,152,428.59 
142,287.338.55 
157,638,606.32 
220,611,222.52 
232,622,282.35 

33 
3.8 
2.9 
6.9 
4.6 

$19,987,920.76 
29,608,088.32 
30,922.05.=>.56 
48.147,980.25 
59,639,224.88 

3.5 

4.9 
3.2 
6.1 

7.8 

$27,516,526.06 
40,163,315.35 
39,408,964.34 
45.-557,376.77 
61,930,779.70 

39 
2.5 
1.6 
4.9 
5.6 

There  has  been  no  investigation  of  the  flour-milling  industry  of  the 
United  States  sufficiently  extensive  to  estabhsh  a  typical  satisfactory 
rate  of  profit  on  sales  for  the  industry  as  a  whole.  The  great  excess 
of  flour-making  capacity  over  flour  consumption,  the  surplus  supply 
of  wheat  and  also  of  flour,  the  relative  simplicity  of  flour  production, 
and  the  small  exports  of  wheat  and  flour  in  some  recent  years  (notably 
in  the  fiscal  year  1905,  see  p.  12)  all  indicate  that  wheat-flour  millhig 
under  normal  conditions  would  not  be  expected  to  reahze  as  large 
profits,  either  on  sales  or  investment,  as  are  realized  by  those  indus- 
tries in  which  demand  appears  to  be  expanding  at  a  much  more  rapid 
rate  than  population.  Table  21  shows  that  during  the  first  three 
years  covered,  the  average  profit  on  sales  was  less  than  3.5  per  cent. 
Nevertheless,  according  to  Table  20,  the  average  investment  for  these 
companies  increased  from  $43,687,91 1.12  in  1913-14  to  $48,248,643.87 
in  1915-16.  This  showing  appears  to  indicate  that  favorably  situ- 
ated mills  will  prosper  on  a  profit  of  less  than  4  per  cent  on  sales 
ev^sn  when  the  price  of  flour  is  at  a  fairly  low  level. 

The  increase  in  prices  during  the  five  years  covered  by  the  report 
was  such  that  the  receipts  from  sales  of  38,450,000  barrels  in  1913-14 
amounted  to  only  $159,656,875.41,  whde  receipts  from  sales  of  only 
34,659,000  barrels  m  1917-18  amounted  to  $354,192,286.93.  In 
spite  of  an  increase  of  90  per  cent  in  the  price  at  which  flour  was  sold 
in  the  last  two  years  of  the  five,  the  37  companies  advanced  their 
average  rate  of  profit  on  sales  to  nearly  6  per  cent. 

The  rate  of  profit  realized  on  the  sales  by  the  37  companies  in 
1913-14  was  3.4  per  cent.  With  advancing  prices  in  1914-15,  due 
to  increased  demand  from  Europe  on  account  of  the  war,  the  rate 
increased  to  3.7  per  cent.  In  1915-16  the  European  countries  were 
apparently  able  to  supply  their  demands  at  lower  prices  from  other 


Ul< 


COSTS,  PRICES,  AND  PROFITS. 


77 


countries.  As  a  consequence  the  average  price  realized  by  the  37 
companies  fell  off  and  the  rate  of  profit  on  sales  decreased  to  2.7 
per  cent.  With  the  complete  change  in  condition  in  1916-17 
(referred  to  in  preceding  section)  the  profit  on  sales  advanced  to 
6.5  per  cent,  but  under  Government  regulations  in  the  following 
year  was  brought  back  to  5.3  per  cent. 

The  rate  of  profit  on  sales  for  the  Northwestern  group  fell  below  3 
per  cent  in  only  one  year  of  the  five.  That  was  the  year  1915-16, 
when  it  w^as  2.9  per  cent.  In  that  year  this  group  realized  practically 
16  per  cent  profit  on  its  investment.  In  1916-17  the  rate  of  profit 
on  sales  for  this  group  was  6.9  per  cent,  or  considerably  over  twice  as 
much.  The  rate  of  4.6  per  cent  shown  for  1917-18  would  have  been 
higher  if  sales  had  not  been  made  to  the  Government  at  less  than  costs. 
The  amount  of  sales  by  the  Southwestern  group  in  the  last  year 
of  the  period  was  practically  three  times  that  in  the  first  year.  In 
no  year  of  the  five  did  its  rate  of  profit  fall  to  3  per  cent,  although  in 
1915-16,  when  competition  with  the  Northwestern  group  was  excep- 
tionally strong  and  the  wheat  supply  of  the  Southwestern  group  was 
defective  in  quality,  the  rate  of  profit  realized  on  its  sales  fell  to  3.2  per 
cent.  In  spite  of  the  fact  that  its  mill  year  1916-17  did  not  include  the 
very  high-price  months  of  July  and  August,  1917,  the  Southwestern 
group  realized  a  profit  on  sales  of  6.1  per  cent.  This  increase  of 
between  50  and  60  per  cent  in  the  amount  of  sales  and  of  nearly 
100  per  cent  in  the  rate  of  profit  on  sales  resulted  in  the  advance  of 
175  per  cent  in  the  rate  of  return  on  investment  already  noted. 
(See  p.  74.) 

The  effect  of  the  flour  and  wheat  panic  in  the  spring  of  1917  is 
evident  in  the  profits  of  the  Southwestern  group  in  1917-18.  The 
price  at  which  its  flour  was  sold  increased  from  $7.76  to  $10.44  per 
barrel.  Consequently,  in  spite  of  a  decrease  in  the  number  of  barrels 
sold  from  6,200,000  in  1916-17  to  5,700,000  in  1917-18,  its  sales 
advanced  to  practically  $60,000,000  and  the  profit  on  sales  to  practi- 
cally 8  per  cent.  This  meant  a  profit  of  over  $5,000,000,  or  43  per 
cent,  on  an  investment  of  $11,800,000. 

The  showing  for  the  Eastern  group  is  quite  different.  Instead  of 
a  200  per  cent  increase  in  sales.  Table  21  shows  for  that  group  an 
increase  of  about  125  per  cent,  from  $27,500,000  to  $61,900,000.  In 
spite  of  this  relatively  slow  growth  in  sales,  the  rate  of  profit  realized, 
3.9  per  cent  in  1913-14  and  5.6  per  cent  in  1917-18,  showed  no  such 
advance  as  was  shown  for  the  Southwestern  group.  A  decrease  in 
sales  for  this  group  in  1915-16  was  accompanied  by  a  decrease  in  the 
rate  of  profit  on  sales,  with  the  result,  already  noted,  that  the  group 
made  only  6.5  per  cent  on  its  investment  in  that  year. 


-'^-^stum^m^ 


78 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


Section  9.  Average  investment,  receipts,  cost  plus  interest,  and  profit 
per  barrel  of  flour. 

Average  per  barrel  figures  for  the  37  companies. — ^The 
following  table  shows  the  average  investment,  receipts,  cost  plus 
interest,  and  profit  per  barrel  of  flour  for  the  37  companies. 

Table  22. — Average  investment,  receipts,  cost  plus  interest,  and  profit  per  barrel  of  jlowt 
sold  of  the  37  companies  by  years^  1913-14  to  1917-18. 


Investment  per  barrel 

Receipts  per  barrel 

Cost  plus  interest  per  barrel . 
Profit  less  interest  per  barrel. 


191^14 


tl.l4 

4.15 

4.01 

.14 


1914-15 


$1.21 

5.55 

5.34 

.21 


1915-16 


$1.11 

5. 25 

5. 11 

.14 


1916-17 


$145 

8.55 

8.00 

.65 


1917-18 


$1.90 

10.22 

9. 67 

.65 


RELATIVE  INCREASE  OR  DECREASE. 


Investment  per  barrel 

Receipts  per  barrel 

Cost  plus  Interest  per  barrel . 
Profit  less  interest  per  barrel. 


100 
100 
100 
100 


103 
134 
133 
150 


97 
127 
127 
100 


127 
206 
200 
393 


167 
246 
239 
464 


The  investment  figures  for  the  37  companies  shown  in  Table  22 
were  obtained  by  dividing  the  total  investment  in  their  milling 
business  by  the  number  of  barrels  of  wheat  flour  sold.  These  figures 
include  the  capital  used  in  miscellaneous  milling  operations.  This 
method  of  computing  the  investment  per  barrel  was  entirely  satis- 
factory prior  to  1917-18,  because  sales  of  other  cereal  products  were 
so  small  that  including  them  with  the  flour  sales  made  no  change 
in  the  average  figure  per  barrel.  It  was  impossible  to  continue  this 
method  of  computing  average  receipts  per  barrel  after  the  great 
increase  in  the  output  of  coarse-grain  products  in  1917-18,  as  it  would 
have  resulted  in  considerable  changes  from  the  figures  obtained  by 
using  wheat-flour  sales  alone.  Receipts  from  sales  of  flour  were 
therefore  separated  from  the  receipts  from  sales  of  other  cereal 
products.  This  would  have  made  a  corresponding  segregation  of 
the  investment  used  in  that  part  of  the  business  in  1917-18  desirable, 
but  it  was  found  to  be  impracticable. 

In  order  to  obtain  a  cost  and  profit  per  barrel  comparable  with  the 
investment  per  barrel  shown  in  Table  22,  miscellaneous  milling  profits 
were  deducted  from  the  cost  of  flour  and  thus  added  to  profit.  In 
this  way  a  profit  of  65  cents  per  barrel  of  wheat  flour  sold  was  obtained 
for  comparison  with  the  investment  of  $1.90  per  barrel.  This  65- 
cent  profit  was  not  realized  on  the  average  receipts  of  $10.22  per 
barrel  of  flour,  which  include  no  receipts  from  coarse-grain  products. 

To  obtain  an  approximate  cost  and  profit  per  barrel  comparable 
with  the  $10.22  receipts  in  1917-18  and  with  the  costs  and  profits  in 
other  years,  receipts  and  expenditures  have  been  divided  as  fairly 
as  possible  between  wheat  flour  and  nuscellaneous  milling  operations. 


COSTS,  PRICES,   AND  PROFITS. 


79 


Although  the  results  are  not  entirely  satisfactory  ,  it  is  probable  that 
when  the  operations  of  all  these  companies  are  combined  the  figures 
obtained  are  approximately  accurate.  This  segregation  of  the 
accounts  shows  an  approximate  profit  on  miscellaneous  milling  in 
1917-18  of  11  cents  per  barrel  of  wheat  flour  sold.  As  the  item  of 
cost  plus  interest  shown  in  Table  22  was  obtained  by  deducting  this 
profit  on  miscellaneous  miUing  from  the  cost  charged  directly  to 
flour,  it  follows  that  when  it  is  not  deducted,  cost  plus  interest  per 
barrel  in  1917-18  is  increased  from  $9.57  to  $9.68,  and  the  profit  is 
decreased  from  65  cents  to  54  cents. 

The  item  of  interest  which  is  added  to  cost  in  the  table  is  made  up 
of  interest  on  short-time  loans  and  some  discounts,  less  credits  of  a 
similar  character.  The  information  available  in  regard  to  these 
transactions  is  not  sufficient  to  determine  even  approximately  the 
average  amount  of  short-time  funds  employed  in  the  business.  Since 
it  was  impossible  to  increase  investment  by  adding  short-time  funds 
used,  adding  interest  paid  on  such  funds  to  profits  could  not  be  justi- 
fied.' Consequently  this  net  interest  charge  was  added  to  cost  in 
ascertaining  the  profit  per  barrel,  shown  in  Table  22. 

This  interest  account  increased  from  2  and  3  cents  in  the  earlier 
years  to  5  cents  in  1916-17.  This  makes  it  practically  certain  that 
the  mills  were  using  considerably  larger  amounts  of  short-time  loans 
in  that  year.  It  is  also  probable  that  the  decrease  in  interest  to  4 
cents  per  barrel  in  1917-18  indicates  that  they  were  borrowing  less 
money  than  the  year  before.  This  difference  may,  however,  have 
been  largely  due  to  higher  rates  of  interest  in  1916-17.  It  was  not 
feasible  to  obtain  sufficient  information  on  this  subject  to  answer 
this  and  similar  questions. 

As  already  noted,  some  sales  of  coarse  grain  products  were  included 
with  the  flour  sales  prior  to  1917-18.  Furthermore,  the  flour  ac- 
counts show  minor  debits  and  credits  aside  from  actual  receipts  from 
flour.  Nevertheless,  the  receipts  per  barrel  shown  in  Table  22  rep- 
resent with  a  fair  degree  of  accuracy  the  fluctuations  in  the  actual 
price  of  wheat  flour  sold  by  the  37  companies. 

Table  22  shows  that  the  37  companies  increased  their  investment 
per  barrel  of  flour  67  per  cent  during  the  five  years,  from  $1.14  in 
1913-14  to  $1.90  in  1917-18.  During  the  first  three  years  there  was 
no  material  change.  Indeed,  in  1915-16  the  average  investment  of 
the  37  companies  was  3  per  cent  less  than  it  had  been  in  the  year 
1913-14.  A  marked  change  during  1916-17,  the  third  year  of  the 
war,  increased  the  investment  30  per  cent,  from  $1.11  to  $1.45  per 

barrel 

This  increase  of  34  cents  was  very  largely  due  to  the  higher  prices 
paid  for  wheat  in  the  last  half  of  1916-17  and  the  resultant  higher 
value  of  flour  and  wheat  held  in  stock  at  the  close  of  that  year.     In 


'ii  • -.'^»¥;;%''^^^'S^^:^^*S!M«?^^ 


t  1 


!  I      '. 


80 


COMMERCIAL   WHEAT-FLOUK   MILLING. 


July  and  August,  1916,  prices  were  not  appreciably  higher  than  the 
average  during  the  fii-st  three  years  covered  by  the  table,  but  the 
effect  of  the  wheat  and  flour  panic  of  the  spring  of  1917  was  to  advance 
these  prices  to  the  highest  point  kno^^^l  in  many  years.  In  fact, 
prices  at  the  close  of  the  year  1916-17  were  considerably  above  those 
maintained  during  the  year  1917-18,  although  the  investment  shown 
for  1916-17,  obtained,  as  already  noted,  by  averaging  the  investment 
at  the  beginning  and  end  of  the  year,  is  45  cents  less  than  the  invest- 
ment in  1917-18. 

The  prices  of  wheat  and  flour  during  1917-18  w^ere  fairly  w^ell  sta- 
bilized by  Government  regulation.  The  investment  of  $1.90  per 
barrel  shown  for  that  year  is,  therefore,  much  more  typical  of  the 
investment  throughout  the  year  than  the  average  of  $1.45  shown  for 
1916-17.  It  should  be  noted,  however,  that  the  increase  in  invest- 
ment per  barrel  in  1916-17  and  1917-18  was  largely  due  to  the 
decrease  in  number  of  barrels  of  flour  sold,  as  compared  with  1915-16 
(see  Table  16),  and  to  some  extent  also  to  the  necessity  of  making 
certain  changes  in  the  equipment  of  the  mills  because  of  the  greatly 
increased  production  of  coarse  grain  products  in  1917-18.     (See  p.  61.) 

Compilation  of  an  entirely  satisfactory  statement  of  the  increase  in 
prices  of  wheat  flour  from  1913-14  to  1917-18  w^as  an  impossibility. 
The  sales  accounts  which  were  used  showed  aggregate  amounts  of 
flour  sales,  which  included  minor  credits  and  charges,  the  net  amounts 
of  which  could  not  be  determined.  Such  credits  and  charges  were, 
therefore,  necessarily  included  in  the  net  receipts  for  flour,  used  in 
compiling  Table  24.  Nevertheless,  the  net  receipts  so  compiled  show 
with  approximate  accuracy  the  actual  fluctuations  in  the  price  of 
flour  sold  by  the  37  companies. 

Table  22  shows  an  advance  in  average  receipts  per  barrel  from 
$4.15  in  1913-14  to  $10.22  in  1917-18.  The  price  level  for  the  first 
two  years  of  the  war  was  practically  30  per  cent  above  the  1913-14 
level.  The  high  prices  in  the  spring  of  1917  advanced  the  1916-17 
average  to  $8.55 — 106  per  cent  above  the  1913-14  level.  In  1917-18, 
practically  the  last  year  of  the  war,  flour  prices,  as  represented  by 
sales  of  these  companies,  had  advanced  to  146  per  cent  above  the 
prewar  level. 

Attention  has  already  been  called  (see  p.  42)  to  the  fact  that  in  the 
years  1911-14  the  prices  of  flour  were  at  a  relatively  low  level.  Certain 
factors  that  tended  to  hold  the  prices  at  this  low  level  in  1913-14  are 
of  interest  in  connection  with  the  advance  in  prices  during  the  war. 
The  Food  Administration's  compilation  of  available  statistics  shows 
that  the  supply  of  wheat  in  the  United  States  during  the  mill  year 
1913-14  was  probably  larger  than  it  had  ever  been  before.  In  addi- 
tion to  the  large  yield  of  wheat  in  1913,  its  quality  was  excellent 
throughout  the  United  States  and  its  weight  per  bushel  was  excep- 


COSTS,  PRICES,  AND  PROFITS. 


81 


tionally  high.  (See  Exhibit  VI.)  Probably  as  a  result  of  the  effect 
of  this  large  harvest  upon  the  prices  received  by  the  farmers,  they 
used,  according  to  the  best  available  information,  some  200  per  cent 
more  wheat  as  feed  for  live  stock  in  1913-14  than  they  use  under 
normal  crop  and  market  conditions. 

The  harvest  of  1914,  it  is  true,  was  larger  than  that  of  1913,  but 
the  extraordinary  exports  to  Europe  on  account  of  the  war  decreased 
the  supply  remaining  for  use  in  the  United  States.  Furthermore,  in 
the  principal  hard  spring  wheat  States  the  crop  was  relatively  small 
and  the  wheat  of  poor  quality.  These  changes  in  the  situation  are 
reflected  in  the  advance  in  the  price  of  flour  from  $4.15  in  1913-14 
to  $5.55  in  1914-15. 

This  advance  of  34  per  cent  in  the  price  of  flour  from  1913-14  to 
1914-15  was  not  fully  maintained  in  the  following  year,  when  the 
average  price  was  $5.25  per  barrel,  or  only  27  per  cent  above  the 
1913-14  level.  European  demand  for  wheat  from  the  United  States 
was  not  maintained  during  1915-16  at  the  high  level  of  the  previous 
year.  Furthermore,  the  wheat  crop  in  the  Northwest  was  large  and 
of  high  quality.  In  other  sections  of  the  country  also  the  crop  was 
larger  than  had  ever  been  raised  before,  although  of  inferior  quality, 
and  carrying  an  extraordinarily  heavy  percentage  of  moisture. 
The  result  of  these  changes  in  the  situation  was  a  decrease  of  30 
cents  per  barrel  in  the  average  price  for  the  37  companies  in  1915-16, 
which,  however,  was  entirely  due  to  a  decrease  of  nearly  50  cents 
per  barrel  in  the  very  large  sales  made  by  the  Northwestern  group 
in  that  year.     (See  p.  60.) 

Reference  has  already  been  made  to  the  great  difference  in  the 
price  of  flour  at  the  beginning  and  end  of  the  year  1916-17.  It  fol- 
lows that  the  average  receipts  of  $8.55  per  barrel  are  not  representa- 
tive of  prices  prevailing  over  any  considerable  part  of  the  year. 
Nevertheless,  they  show  that,  taking  the  year  together,  the  average 
cost  of  flour  to  the  consumer  was  $3.30  per  barrel  more  than  it  had 
been  throughout  the  year  1915-16. 

The  discussion  of  cost  per  barrel  has  for  the  most  part  been  de- 
ferred to  section  10,  where  an  analysis  of  total  cost  per  barrel  is  pre- 
sented. Of  course,  the  fundamental  factors  influencing  the  fluctua- 
tions in  cost  wore  those  which  have  already  been  referred  to  in  the 
preceding  discussion  of  the  advance  in  prices. 

Table  22  shows  an  increase  in  the  profit  realized  by  the  37  com- 
panies from  14  cents  per  barrel  in  1913-14  to  65  cents  in  1917-18,  an 
advance  of  364  per  cent.  It  is  necessary,  however,  to  keep  in  mind 
the  fact  that  approximately  11  cents  of  the  65  cents  shown  in  the 
table  was  profit  realized  on  sales  of  coarse  grain  products  and  that 
this  total  profit  is  used  because  that  is  the  only  way  to  show"  the  cor- 
183256°— 20 6 


82 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


rect  relation  of  profit  per  barrel  of  flour  to  investment  per  barrel. 
If  the  54  cents,  approximate  profit  realized  directly  from  the  sales  of 
flour  alone,  is  substituted  for  the  65  cents  shown  in  the  table,  the 
increase  over  1913-14  will  drop  to  less  than  300  per  cent — in  fact,  to 
less  than  the  293  per  cent  advance  shown  for  1916-17. 

In  spite  of  an  increase  of  $1.10  in  the  receipts  per  barrel  between 
1913-14  and  191.5-16  the  profit  realized,  14  cents  per  barrel,  was 
exactly  the  same  in  both  years.  The  year  between,  however, 
showed  a  profit  of  21  cents,  an  increase  of  50  per  cent  over  1913-14. 

COMPARrSON  OP  INCREASES  IN  THE  INVESTMENT  PER  BARREL  OP 
THE   37    COMPANIES  AND   OF   THE  DIFFERENT  GROUPS.— The  following 

table  shows  the  investment  per  barrel  of  flour  sold  by  the  37  compa- 
nies for  each  of  the  years  1913-14  to  1917-18,  with  corresponding 
figures  for  the  different  groups,  the  per  cent  of  increase  for  each 
group  annually,  and  the  percentage  relations  of  investment  for  the 
different  groups  in  each  year. 

Table  23. — Comparison  of  increases  in  the  investment  per  barrel  of  the  S7  companies 

and  of  the  different  groups^  by  years,  191S-14  to  1917-18. 


1913-14 

1014-15 

1915-16 

1918-17 

1917-18 

37  companies 

tl.14 

.98 

1.28 

1.74 

$1.21 
1.11 
1.18 
1.67 

$1.11 

.97 

1.27 

1.58 

SI.  45 
1.35 
1.47 
1.85 

SI.  90 

Northwestern  group 

1.79 

Southwestern  group 

2.08 

Eastern  (rrouD...... 

3.17 

RELATIVE  PERCENTAGE  INCREASE  OR  DECREASE. 


37  companies 

Northwestern  group . 
Southwestern  group . 
Eastern  group 


100 

106 

97 

127 

100 

113 

99 

138 

100 

94 

100 

117 

100 

90 

91 

108 

187 
183 
163 
125 


PERCENTAGE  RELATIONS  OF  GROUPS. 


37  companies 

Northwestern  group . 
Southwestern  group. 
Eastern  group 


100 

86 

111 

153 


100 
92 
98 

130 


100 

87 

114 

142 


100 

93 

101 

128 


100 

94 

108 

114 


Table  23  makes  it  clear  that  the  increase  of  67  per  cent  in  the 
investment  of  the  37  companies  combined  was  the  result  of  very 
different  changes  in  the  investment  shown  for  the  different  groups. 
At  the  beginning  of  the  period  the  investment  of  the  Northwestern 
group  was  relatively  very  much  smaller  than  that  of  either  of  the 
other  groups.  During  the  five  years  covered  by  the  table,  however, 
81  cents  was  added  to  its  investment,  and  only  43  cents  to  the  invest- 
ment of  the  Eastern  group.  The  addition  to  the  investment  of  the 
Southwestern  group  was  80  cents,  or  practically  the  same  as  that  for 
the  Northwestern. 


\ 


COSTS,  PRICES,   AND  PROFITS. 


83 


Measured  in  percentages,  the  increase  in  the  investment  of  the 
Northwestern  group  was  83  per  cent,  of  the  Southwestern  63  per  cent, 
and  of  the  Eastern  only  25  per  cent.  The  result  of  these  ch.inges 
was  a  gradual  approach  of  the  relative  investment  of  the  different 
groups  to  the  same  figure.  The  percentage  relations  in  Table  23 
show  that  while  the  investment  of  the  Northwestern  group  was  14 
per  cent  below  the  average  investment  for  the  entire  group  in  1913-14, 
it  was  only  6  per  cent  below  the  average  in  1917-18.  On  the  other 
hand,  the  investment  for  the  Southwestern  group,  which  was  11  per 
cent  above  the  average  in  1913-14,  was  only  8  per  cent  above  the 
average  in  the  later  year.  The  approach  of  the  investment  for  the 
Eastern  group  to  the  common  average  was  even  more  striking,  falling 
from  an  excess  of  53  per  cent  in  the  first  year  of  the  period  to  only  14 
per  cent  above  the  average  in  the  last  year. 

The  principal  factor  in  this  increasing  similarity  in  the  amount  per 
barrel  invested  by  the  different  groups  was,  without  doubt,  the  ad- 
vancing price  of  wheat  and  flour  carried  in  inventories.  The  stabili- 
zation of  wheat  prices  through  Government  restrictions  in  1917-18 
also  contributed  to  this  result.  An  indication  of  the  effect  of  the 
advancing  price  of  wheat  is  found  in  the  fact  that  if  a  mill  had  carried 
the  same  quantity  of  wheat  in  stock  in  1917-18  as  it  carried  in  1913-14, 
according  to  the  price  figures  in  Table  14,  it  would  have  had  two  and 
one-half  times  as  much  money  invested  in  wheat.  The  effect  of  the 
greater  similarity  in  the  cost  of  wheat  for  the  different  groups  in 
1917-18,  which  was  undoubtedly  to  some  extent  duo  to  Government 
stabilization,  is  indicated  by  a  comparison  of  the  figures  for  the 
Eastern  and  the  Northwestern  groups  in  1913-14  and  1916-17. 
In  the  earlier  year  the  investment  per  barrel  of  the  Eastern  group 
was  76  cents  larger  than  that  of  the  Northwestern;  in  the  latter  year 
only  50  cents  larger.  This  change  was  evidently  due  in  part  to  the 
fact  that  in  1913-14  the  wheat  used  in  a  barrel  of  flour  cost  the 
Eastern  group  38  cents  more  than  it  cost  the  Northwestern  fsee 
p.  118),  but  that  in  1916-17  the  cost  of  wheat  to  the  Northwestern 
group  was  39  cents  per  barrel  more  than  to  the  Eastern. 

A  like  contrary  change  in  investment  per  barrel  for  the  North- 
western group  and  the  Southwestern  group  is  found  in  the  first  two 
years  of  the  period  covered  by  the  table,  which  shows  an  increase  in 
the  investment  of  the  Northwestern  from  98  cents  per  barrel  to  $1.11, 
and  a  decrease  for  the  Southwestern  group  from  SI. 26  to  $1.18. 
In  the  first  year  the  cost  of  wheat  per  barrel  for  the  two  groups  was 
the  same,  but  in  the  second  year,  1914-15,  it  was  62  cents  more  per 
barrel  for  the  Northwestern  than  for  the  Southwestern.  The  result 
of  these  changes  was  that,  measured  by  percentage  relations,  the  in- 
vestments per  barrel  for  the  two  groups  were  nearer  together  than  in 
any  other  year,  that  of  the  Northwestern  havinoj  advanced  to  within 


ws^m 


84 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


8  por  cent  of  the  average  for  the  37  companies,  while  that  for  the 
Southwestern  ha^  fallen  to  2  per  cent  below  the  average,  the  amount 
of  investment  for  the  two  groups  being,  as  already  noted,  SI.  11 
and  $1.18.  The  opposite  trend  of  the  investment  per  barrel  of  these 
two  groups  in  1915-16  is  also  explained  in  large  part  by  the  fact  that 
in  that  year  the  cost  of  wheat  had  again  become  practically  the  same 
for  the  two  groups.  It  is  interesting  to  note  also  that  the  excep- 
tionally high  cost  of  wheat  for  the  Northwestern  group  in  1916-17, 
99  cents  per  barrel  in  excess  of  that  for  the  Southwestern,  again 
brought  the  per  barrel  investment  of  the  two  groups  almost  as  near 
to  each  other  as  in  1914-15. 

Comparison  of  advances  in  prices,  or  receipts  per  barrel, 

OF  the  37  companies,  AND  OF  THE  DIFFERENT  GROUPS. — The  fol- 
lowing table  shows  average  receipts  per  barrel  of  flour  sold  for  the 
37  companies  and  for  each  of  the  different  groups,  by  years,  from 
1913-14  to  1917-18,  inclusive: 

Table  24. — Comparison  of  advances  in  prices,  or  receipts  per  barrel,  of  the  37  companies 
and  of  the  different  groups,  by  years,  1913-14  to  1917-18. 


1913-14 

1914-15 

1915-16 

1916-17 

1917-18 

37  companies 

14.15 
4.11 
4.00 
4.46 

»5.55 
6.67 
5.04 
5.53 

15.25 
5.19 
5.04 
5.68 

f8.55 
8.77 
7.76 
8.39 

$10.22 

Northwestern  Rroop 

10.06 

Southwestern  group 

10.44 

Eastern  ctoud 

10.62 

RELATIVE  PERCENTAGE  INCREASE  OR  DECREASE. 


37  companies 

Northwestern  cronp. 
Southwestern  group. 
Eastern  group 


100 
100 
100 
100 


134 
138 
120 
124 


127 
126 
126 
127 


206 
213 
194 

188 


246 
255 
261 
238 


PERCENT.\GE  RELATIONS  BY  GROUPS, 


37  companies 

Northwestern  group. 
Southwestern  group. 
Eastern  group 


100 

100 

100 

100 

99 

102 

99 

103 

96 

91 

96 

91 

IDS 

100 

108 

98 

100 

98 

102 

104 


The  advance  in  the  average  price  of  the  37  companies  from  S4.15 
to  $10.22,  or  146  per  cent,^®  has  already  been  noted.  This  average 
advance  of  S6.07  per  barrel  was  greater  than  the  advance  of  $5.95 
in  the  Northwest,  but  less  than  the  advance  in  the  Southwest  or 
East.  Nevertheless,  because  of  the  relatively  low  price  of  flour  for 
the  Northwestern  group  in  1913-14  (99  per  cent  of  the  average) 
and  the  relatively  high  price  for  the  Eastern  group  (lOS  per  cent  of 
the  average)  the  rate  of  advance  for  the  Northwestern  group  was  155 
per  cent,  while  that  for  the  Eastern  was  only  138  per  cent. 

•  The  flowr  sold  under  Government  restrictions  in  1917-18  was  probably  of  poorer  quality  on 
an  average  than  that  sold  in  the  other  four  years,  and  it  also  included  sales  to  the  (Government  at  less 
than  cost 


COSTS,  PRICES,  AND  PROFITS. 


85 


The  tendency  of  prices  received  by  the  three  groups  to  draw  to- 
gether is  quite  as  noticeable  as  the  corresponding  tendency  in  regard 
to  investment  already  discussed.  This  tendency  is  strikingly  illus- 
trated by  the  advance  of  the  price  in  the  Southwest  from  15  cents 
below  the  average  in  1913-14  to  22  cents  above  in  1917-18.  Ex- 
pressed in  percentages,  this  means  that  in  1913-14  the  South- 
western group  received  only  96  per  cent  of  the  average  price  and  in 
1917-18,  102  per  cent.  Also  that  prices  for  this  group  advanced  161 
per  cent,  while,  as  just  noted,  prices  farther  east  advanced  only  138 
per  cent.  This  tendency  of  prices  for  all  groups  to  approach  each 
other  was,  of  course,  largely  due  to  the  causes  responsible  for  the 
same  tendency  in  the  average  investment  per  barrel  for  the  different 
groups  already  discussed.  It  must  be  noted,  furthermore,  that  if 
sales  of  the  Northwestern  group  in  the  two  high-price  months  of 
July  and  August,  1917,  had  been  included  in  1917-18  figures,  as  were 
those  of  the  Southwestern,  and  if  sales  to  the  Government  in  191 S 
below  cost,  which  were  according  to  available  information  much 
larger  in  the  Northwest  than  in  the  Southwest,  had  been  excluded  in 
both  cases,  it  is  quite  possible  that  the  receipts  per  barrel  for  these 
two  groups  would  have  been  practically  the  same  instead  of  varying 
so  much  as  the  $10.06  for  the  Northwestern,  and  the  $10.44  for  the 
Southwestern,  now  shown  in  the  table. 

The  predominating  effect  of  the  larger  business  of  the  North- 
western group  on  averages  for  the  37  companies  is  shown  by  the  nar- 
row range  of  the  variations  in  its  price  per  barrel  from  the  average. 
In  no  year  did  it  fall  more  than  2  per  cent  below  the  average,  and 
only  in  1916-17  was  it  as  much  as  3  per  cent  above  the  average. 

The  noticeable  decrease  in  the  relative  price  in  the  Southwestern 
group  from  96  in  1913-14  to  91  in  1914-15,  and  in  that  of  the  Eastern 
from  108  in  1913-14  to  100  in  1914-15,  were,  however,  largely  due  to 
the  fact  that  the  respective  advances  for  those  two  groups  in  that  year 
were  only  26  and  24  per  cent,  while  the  corresponding  advance  for 
the  Northwestern  group  was  38  per  cent. 

The  advance  in  prices  during  the  first  three  years  covered  by  the 
table,  1913-14  to  1915-16,  was  practically  the  same — approximately 
27  per  cent.  Consequently,  the  figures  showing  the  relation  of  prices 
for  the  different  groups  are  exactly  the  same  for  these  years.  With 
the  renewal  of  a  much  stronger  foreign  demand  in  1916-17,  relative 
prices  for  the  different  groups  went  back  to  approximately  the  figures 
for  1914-15.  It  is  not  clear,  however,  that  this  change  in  the  export 
situation  was  the  exclusive,  or  even  the  most  important,  factor  af- 
fecting the  relatively  greater  advance  for  the  Northwestern  group, 
of  prices  in  1916-17  over  those  in  1915-16,  expressed  by  87  per  cent 
of  the  1913-14  price,  while  the  corresponding  figures  for  the  South- 
western and  Eastern  groups  were  only  68  and  61  per  cent  respectively. 


86 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


Comparison  of  cost    plus    interest   per    barrel  of  the  37 

COMPANIES    AND    OF    THE    DIFFERENT    GROUPS. — The    following    table 

shows  the  average  cost  per  barrel  of  flour  sold,  together  with  the  in- 
terest paid  on  short-time  loans,  for  the  37  companies  and  also  for 
each  of  the  tlu-ee  groups,  m  each  of  the  five  years  from  1913-14  to 
1917-18,  inclusive;  also  the  rate  of  increase  in  cost,  using  cost  in 
1913-14  as  a  base,  and  percentage  relations  of  cost  for  each  company 
to  cost  for  the  37  companies,  by  years. 

Table  25. — Comparison  of  cost  plus  interest  per  barrel  of  the  S7  companies  and  the 

different  groups,  by  years,  1913-14  to  1917-18. 


37  companiVs 

Northwestern  croup. 
South  wcsttrn  group. 
Eastern  group 


1913-14 


$4.01 
3.98 
3.86 
4.28 


1914-15 


$5.34 
5.46 
4.79 
5.38 


1915-16 


$5.11 
5.04 

4.88 
5.58 


1916-17 


$8.00 
8.17 
7.28 
7.96 


1917-18 


$9.57 
9.48 
9.56 
9.95 


RELATIVE  PERCENTAGE  INCREASE  OR  DECREASE. 

37  comnanies    

100 
100 
100 
100 

133 
137 
124 
126 

127 
127 
126 
130 

200 
205 
189 
186 

239 

Nnrf hwp^tern  PTOun  .    . ...................■■■.•• 

238 

Southwestern  croup 

248 

Eastern  crouD 

232 

PERCENTAGE  RELATIONS  BY  GROUPS. 

STprnirnfttiies                     .    . ................... 

100 
99 
96 

107 

100 

102 

90 

101 

100 
99 
95 

109 

100 

102 

91 

100 

100 

"Nnrthwrsfprn  PTOiiD    .          ... . 

99 

Southwestern  CTOUD   ..   - 

100 

TCnstpm  PTOUD     . .    ..... 

• 

104 

As  already  noted,  discussion  of  factors  affecting  cost  fluctuations 
has  been  largely  deferred  until  consideration  of  the  analyses  of  the 
cost  of  making  and  selling  a  barrel  of  flour  is  taken  up  in  section  10. 
Table  25  has  been  inserted  at  this  point,  however,  in  order  to  present 
the  more  important  cost  fluctuations,  in  relatively  close  connection 
with  corresponding  fluctuations  in  prices  and  profits. 

A  glance  at  the  relative  increases  and  decreases  in  Tables  24  and 
25  makes  it  clear  that  average  receipts  advanced  more  rapidly,  with 
relatively  few  exceptions,  than  costs  of  production  and  distribution. 
In  1915-16,  a  year  of  relatively  low  profits,  the  rate  of  advance  over 
the  1913-14  level  was  practically  the  same  for  cost  plus  interest  as 

for  prices. 

As  was  to  have  been  expected,  Table  25  shows  the  same  drawing 
together  of  costs  plus  interest  for  the  different  groups  that  was  shown 
for  investments  and  prices  in  Tables  23  and  24. 

As  in  the  case  of  prices,  the  rate  of  increase  shown  in  cost  plus 
interest  is  greater  for  the  Northwestern  group  than  for  the  Eastern, 
although  the  amount  of  increase  for  the  latter  is  $5.67  as  compared 
with  only  $5.50  for  the  former.  This,  of  course,  is  due  to  the 
fact  that  cost  plus  interest  was  30  cents  more  for  the  Eastern  group 


HMttil 


COSTS,   PRICES,   AND  PROFITS. 


87 


in  1913-14  than  for  the  Northwestern,  their  relative  costs  being  ex- 
pressed by  107  and  99  when  cost  plus  interest  for  the  37  companies 
is  represented  by  100. 

There  was  less  difference  in  the  rate  of  advance  for  the  different 
groups  in  cost  plus  interest  than  in  price.  For  the  Southwestern  group 
the  rate  of  advance  in  price  from  1913-14  to  1917-18  had  been  23 
per  cent  greater  than  for  the  Eastern,  but  its  increase  of  148  per  cent 
in  cost  plus  interest  was  only  16  points  greater  than  the  increase  of 
132  per  cent  for  the  Eastern.  The  result  of  this  relatively  more 
rapid  advance  of  -cost-plus  interest  was  the  much  smaller  rate  of 
increase  in  profit  per  barrel  for  the  Eastern  group  compared  with 
that  of  the  Southwestern,  shown  in  Table  26. 

The  percentage  relations  in  Table  25  show  a  similar  striking  like- 
ness in  relative  cost  plus  interest  in  the  first  and  third  years  covered 
by  the  table,  and  also  in  the  second  and  fourth,  to  that  in  prices, 
which  was  commented  on  in  the  discussion  of  Table  24.  For  the 
Northwestern  group  relative  cost  plus  interest  is  expressed  by  prac- 
tically the  same  figures  as  relative  prices.  On  the  other  hand,  the 
fact  that  relative  cost  plus  interest  of  the  Southwestern  group  in 
1917-18  is  the  same  as  the  average  for  the  37  companies,  while  its 
relative  price  was  2  per  cent  above  the  average  reflects  the  conditions 
which  resulted  in  the  much  larger  rate  of  profit  realized  by  that  group 
than  by  the  other  groups  in  1917-18. 

Comparison  of  profit  per  barrel  of  the  37  companies  and  of 
THE  different  GROUPS. — ^The  following  table  shows  the  profit  per 
barrel  of  flour  sold  for  the  37  companies  for  each  year  from  1913-14 
to  1917-18,  together  with  that  realized  by  the  different  groups  in 
the  same  years;  the  increases  and  decreases  in  profit  for  the  different 
groups,  by  years;  and  the  relations  of  profits  for  the  different  groups 
in  each  year,  the  profit  of  the  37  companies  being  represented  by  100. 

Table  26. — Comparison  of  profit  per  barrel  of  the  37  companies  and  of  the  different 

groups,  by  years,  1913-14  to  1917-18. 


37  companies 

Northwestern  group. 
Southwestern  group. 
Eastern  group 


1913-14 


SO.  14 
.13 
.14 
.18 


1914-15 


SO.  21 
.21 
.25 
.15 


1915-16 


SO.  14 
.15 
.16 
.10 


1916-17 


SO.  55 
.60 
.48 
.43 


1917-18 


SO.  65 
.58 
.88 
.67 


RELATIVE    PERCENTAGE  INCREASE   OR  DECREASE. 


87  companies 

NOTthwestem  group. 
Southwestern  group. 
Eastern  group 


100 
100 
100 
100 

150 

162 

179 

83 

100 

115 

114 

56 

393 
462 
343 
239 

464 

446 
629 
372 


f'ERCENTAGE   RELATIONS   BY  GROUPS. 

87comT)anies 

100 

93 

100 

129 

100 

100 

119 

71 

100 

107 

114 

71 

100 

109 

87 

78 

100 

Northwestern  group 

89 

Southwestern  group 

135 

Eastern  etoud 

103 

;'ap?**  'Ji_ 


88 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


COSTS,  PRICES,  AND  PROFITS. 


89 


Comment  has  already  been  made  on  the  fact  that  the  profit  shown 
for  1917-18  in  Table  22  is  only  for  comparison  with  the  investment 
per  barrel.  (See  p.  78.)  For  example,  the  increase  of  364  per  cent 
in  the  profit  of  the  37  companies  from  1913-14  to  1917-18  would  be 
misleading  if  account  was  not  also  taken  of  the  increase  of  67  per 
cent  in  their  investment.  Furthermore,  it  must  not  be  forgotten 
that  the  profits  shown  in  Table  26  are  the  profits  on  all  mill  products 
sold.  It  is  only  in  1917-18,  however,  that  this  combined  profit  is 
appreciably  different  from  the  profit  on  wheat  flour  alone.  Never- 
theless, the  combined  profit  has  been  shown  for  1917-18,  although 
it  is  appreciably  more  than  the  profit  on  wheat  flour  sales  alone  in 
that  year  because  it  was  impossible  to  obtain  a  satisfactory  profit 
per  barrel  figure  on  wheat  flour  alone,  for  the  different  groups. 

It  is  obvious  that  the  per  barrel  profit  figures  shown  above  are 
not  comparable  with  the  25  cents  per  barrel  margin  agreed  upon  by 
the  Food  Administration  and  the  millers  for  a  part  of  the  year 
1917-18.  Not  only  is  the  period  covered  different,  but  the  25  cents 
mai-gin  Avas  at  no  time  construed  as  covering  aU  the  operations  of 
the  companies,  including  their  wheat  elevator  and  jobbing  depart- 
ments. Table  26,  on  the  contrary,  covers  all  transactions  carried 
on  with  the  investment  charged  to  the  wheat-flour  business. 

Table  26  shows  an  increase  in  profit  per  barrel  over  the  five-year 
period  of  45  cents  for  the  Northwestern  group,  74  cents  for  the 
Southwestern,  and  49  cents  for  the  Eastern.  Measured  in  percent- 
ages, the  respective  increases  were  346  for  the  Northwestern,  529  for 
the  Southwestern,  and  only  272  for  the  Eastern. 

During  the  first  three  years  covered  by  the  table  the  increases  over 
the  profits  in  1913-14  do  not  show  sufficient  difference  for  the  North- 
western and  Southwestern  groups  to  call  for  comment.  On  the  other 
hand,  while  these  two  groups  were  making  some  15  per  cent  more 
profit  in  1915-16  than  in  1913-14,  the  profit  of  the  Eastern  group 
had  gone  down  44  per  cent.  In  1916-17  the  Southwestern  group 
also  fell  considerably  behind  the  Northwestern,  the  increase  for  the 
latter  amounting  to  362  per  cent  while  that  for  the  former  was  243 
per  cent  and  that  for  the  Eastern  only  139  per  cent,  above  the  1913-14 
figure.  It  is  quite  possible  that  a  considerable  part  of  the  greater  in- 
crease in  profit  for  the  Northwestern  group  in  1916-17  may  have  been 
due  to  the  fact  that  the  1916-17  mill  year  of  the  Northwestern  group 
included  two  very  high-price  months  in  the' summer  of  1917,  after  the 
close  of  the  mill  year  of  the  Southwestern  group.  This  view  of  the 
situation  is  supported  by  the  fact  that  in  1917-18  the  profit  of  the 
S«uuthwestern  group  and,  also,  of  the  Eastern  group,  both  showed 
remarkable  increases  (the  mill  year  of  these  two  groups  is  practically 
identical),  while  that  of  the  Northwestern  group  decreased.     It  is 


> 


4* 


impossible  to  determine  from  annual  figures  how  much  this  difference 
in  the  12  months  covered  by  the  mill  years  of  the  different  groups 
affect  the  figures  shown  in  Table  26. 

The  relative  rates  of  profit  per  barrel  of  flour  show  much  greater 
variation  between  the  several  groups  than  was  shown  by  investment, 
receipts,  or  cost  plus  interest  figures.  In  no  two  years  does  there 
appear  to  be  any  similarity  in  these  relative  profits  for  the  different 
groups.  In  1915-16  and  1916-17  the  relative  profit  for  the  North- 
western gi'oup  was  7  per  cent  and  9  per  cent,  respectively,  above  the 
average  of  the  37  companies.  On  the  other  hand,  in  the  first  and 
last  years  of  the  table  it  was,  respectively,  7  per  cent  and  1 1  per  cent 
below  the  average.  In  three  years  of  the  five  the  Southwestern 
group  showed  a  profit  considerably  in  excess  of  the  average.  In 
1917-18  this  excess  amounted  to  35  per  cent.  In  the  preceding  year, 
the  only  one  in  which  its  profit  was  less  than  the  average,  the  differ- 
ence was  only  13  per  cent.  The  best  showing  made  by  the  Eastern 
group  was  in  1913-14,  when  its  profit  per  barrel  was  29  per  cent  above 
the  average.  In  the  two  following  years  it  was  29  per  cent  below  the 
average.  In  1916-17  it  was  22  per  cent  below,  but  in  1917-18,  3  per 
cent  above. 

Note. — The  Commission  ha?  compiled  data  from  the  accounts  of  17  other  companies 
for  the  years  1913-14  to  1916-17  and  of  65  companies  in  1917-18.  These  concerns  are, 
in  a  general  way,  competitors  of  the  37  companies,  selUng  in  the  same  markets  and 
making  approximately  the  same  kinds  of  fiour.  Their  accounts  have  been  very  care- 
fully revised  and  the  information  is  probably  as  reliable  as  that  obtained  from  the  37 
companies,  except  that  profits  have  been  thrown  from  one  year  to  another  through  the 
use  of  inventories  at  market  price,  which  the  Commission  was  unable  to  revise.  It 
should  be  noted  that  in  1917-18  results  are  shown  for  about  four  times  as  many  mills 
as  in  the  previous  years. 

The  average  annual  business  for  each  of  these  mills  was,  roughly,  one-fourth  the 
average  for  the  37  companies;  that  is,  not  far  from  250,000  barrels  each  per  year.  The 
accounts  furnish  no  conclusive  evidence  that  this  difference  in  quantity  of  business 
resulted  in  any  difference  in  the  amount' of  capital  employed  per  barrel  ot  flour. 
Throwing  the  first  two  years  of  the  war  together  to  obviate  to  some  extent  the  defect 
referred  to  in  the  preceding  paragraph,  it  appears  that  these  smaller  companies  made  an 
appreciably  larger  rate  of  profit  on  investment  than  was  made  by  the  37  companies. 
Pursuing  the  same  method  with  the  last  two  years,  the  situation  was  reversed  and  the 
37  companies  show  larger  profits  than  the  smaller  companies.  This  change  may  be 
due  in  part  to  bringing  in  a  larger  number  of  small  mills.  The  accounts  show,  however, 
that  the  advance  in  prices  was  much  less  for  the  small  companies  than  for  the  larger 
ones. 

The  earnings  of  G5  companiep  on  their  milling  business  in  1917-18  gave  them  an 
average  profit  of  55  cents  per  barrel  of  floiu*  sold,  while  the  corresponding  profit  for 
the  37  companies  was  65  cents.  Of  these  per  barrel  profits  the  65  companies  made 
about  4^  cents  on  miscellaneous  milling  and  the  37  companies  somewhere  near  11 
cents. 


.J 


mamm 


90 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


Section  10.  —Costs  in  wheat-flour  milling. 

Analysis  of  per-bahrel  cost. — ^An  analysis  of  the  cost  of  mak- 
ing and  selling  a  barrel  of  wheat  flour  based  on  expenditures  of  the  37 
companies  is  presented  in  the  following  table.  Corresponding  analyses 
for  the  different  groups  are  given  in  Exhibit  VII. 

Table  27.— Analysis  of  the  costs  of  the  S7  companus  in  maling  and  selling  a  barrel  of 

'wheat  flour,  by  years,  1913-14  to  1917-18. 


Item  of  cost. 


Wheat 

I'ackapes 

Mill  operating  costs 

General  and  selling  expense . 


Total  cost  of  flour  and  feed . 
Charged  to  production  of  feed  — 


Net  cost  of  flour  per  barrel  i. 


1913-14 


$3.96 
.27 
.22 
.30 


4.75 
.76 


Mill  operating  costs:  ,      .      „  ♦• 

Mill  labor,  power,  and  miscellaneous  operating 

costs 

Repairs 

Depreciation  * 


Total 

Total  operating,  general  and  selling  costs'. 


3.99 


.17 
.02 
.03 


1914-15 


15.42 
.23 
.22 
.33 


6.20 

.84 


5.36 


1915-16 


$5.09 
.24 
.21 
.81 


5.85 
.77 


.22 


,52 


.17 

.02 
.03 


.22 


.55 


5.08 


.16 

.02 
.03 


1916-17 


$8.32 
.31 

.28 
.42 


9.33 
1.26 


8.07 


.21 


.52 


1917-18 


$9.72 
.47 
.37 
.41 


10.97 
1.29 


9.68 


1  Based  on  barrels  of  flour  produced. 

»  ThesecoSs^do  not  include  interest  charges,  which  amounted  to  2  cents  in  1914, 3  cents  in  1915, 2  cents  in 
1916, 6  cents  in  1917,  and  4  cents  in  1918. 

The  information  presented  in  Table  27,  it  should  be  remembered, 
is  not  applicable  to  the  entire  milling  business  of  the  United  States. 
It  is  important,  however,  because  it  represents,  as  near  as  could  be 
ascertained  without  undue  expenditure  of  time  and  money,  the 
actual  cost  of  about  35  per  cent  of  the  flom:  produced  in  the  United 
States,  the  sales  of  which  are  so  widely  distributed  that  they  largely 
determine  the  price  level  in  practically  every  commercial  flour  market 
east  of  the  Rocky  Mountains,  and  even  affect  in  some  degree  the  range 
of  flour  prices  on  the  Pacific  coast. 

The  table  shows  that  the  prewar  cost  of  making  and  selling  a 
barrel  of  flour  and  deUvering  it  at  miUing  points  or  miU  branch 
houses,  generally  packed  in  cotton  or  paper  sacks,  was  $3.99.  The 
effect  of  the  first  two  years  of  the  European  war  was  to  increase  the 
total  cost  per  barrel  about  30  per  cent— to  $5.36  in  1914-15  and  $5.08 
in  1915-16.  The  semipanic  conditions  at  the  beginning  of  the  war 
apparently  increased  the  cost  of  wheat  in  1914  considerably,  but  the 
world-wide  bumper  wheat  crop  of  1915  resulted  in  a  somewhat  lower 
cost  in  the  following  year. 

In  the  early  part  of  1916-17  costs  were  not  appreciably  higher  than 
the  general  level  for  the  two  preceding  years,  but  an  increasing  de- 


)- 


> 


)' 


\ 


>' 


>- 


>- 


COSTS,  PRICES,  AND  PROFITS. 


91 


mand  from  Europe  began  to  affect  the  price  of  wheat  early  in  the  year. 

The  resulting  advance  of  prices  culminated  in  the  panic  of  the  spring 
of  1917.     In  May  of  that  year  wheat  sold  in  Chicago  for  $3.45 — more 

than  a  dollar  higher  than  the  price  fixed  by  the  Government  in  the 

following  fall.     Other  costs  also  advanced  considerably,  with  the 

result  that  the  average  net  cost  per  barrel  of  flour  made  by  the  37 

companies  throughout  the  year  1916-17  was  $8.07. 

The  price  of  wheat  was  stabilized  by  the  Government  early  in  the 
mill  year  1917-18.  As  a  consequence,  the  average  cost  of  S9.68 
per.  barrel,  shown -in  Table  27  for  that  year,  is  fairly  representative 
of  the  cost  of  producing  and  distributing  a  barrel  of  flour  throughout 
the  year.  It  appears  from  the  changes  reviewed  in  the  preceding 
paragraphs  that  the  effect  of  the  war  on  the  cost  of  wheat  flour  in  the 
United  States  was  an  advance  of  fully  140  per  cent.  The  advances 
in  the  different  items  of  cost  were  as  follows:  Wheat,  146  per  cent; 
packages,  74  per  cent;  mill  operating  costs,  68  per  cent;  general 
and  selling  expenses,  37  per  cent.  In  1917-18  the  whefat  used  in  a 
barrel  of  flour  cost  $5.76  more  than  it  did  in  1913-14,  wliile  all  other 
costs  had  increased  only  46  cents. 

The  deduction  from  total  cost,  charged  to  the  production  of  feed, 
increased  from  76  cents  in  1913-14  to  $1.29  in  1917-18.  The  miUers 
would  undoubtedly  have  realized  considerably  more  than  $1.29  for 
feed  in  1917-18  had  it  not  been  for  Government  price  restrictions. 

Cost  of  wheat. — ^Table  27  shows  clearly  the  importance  of  the 
cost  of  wheat  in  the  manufacture  of  floiu*.  UsuaUy  about  70  per 
cent  of  the  wheat  ground  is  sold  in  the  form  of  flour.  A  relatively 
simple  process  crushes  the  grain  and  removes  the  offal.  Flour  is 
sometimes  sold  at  the  miU  for  less  than  the  cost  of  the  wheat  used 
in  making  it.  This  preponderance  of  the  cost  of  wheat  in  wheat- 
flour  costs,  together  with  the  influence  of  the  quahty  and  quantity 
of  easily  available  wheat  on  the  prosperity  of  milling  enterprises 
(see  Exhibit  VI),  caUs  for  a  more  detailed  discussion  of  the  supply  of 
wheat. 

Demand  and  supply  factors  affecting  the  miUer's  cost  of  wheat. — - 
The  following  discussion  of  the  wheat  crop  of  the  United  States  and 
the  various  uses  made  of  that  crop  in  recent  years  is  based  largely 
on  the  United  States  Food  Administration's  compilation  of  data 
collected  by  the  Government  and  by  statisticians  of  wheat  and  flour 
trade  pubUcations.  Much  of  the  available  information  is  based  on 
estimates.  Nevertheless,  the  care  with  which  these  estimates  are 
made  warrants  their  use  in  comparative  tables  and  the  acceptance 
of  the  indicated  changes  in  wheat  production  and  consumption  with 
a  considerable  degree  of  confidence.  In  any  satisfactory  discussion 
of  the  situation  in  the  United  States,  however,  it  is  necessary  to  have 


92 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


some  information  in  regard  to  the  production  and  consumption  of 
wheat  in  other  countries  and  in  earher  years.*® 

Changes  in  the  stock  of  wheat  on  hand  July  1,  of  each  of  the  five 
years  under  review,  the  wheat  crop,  the  net  exports  of  wheat,  and 
the  indicated  quantity  of  wheat  used  in  the  United  States  in  each 
year  is  shown  in  the  following  table: 

Table  28. — The  wheat  crop  of  the  United  States  and  qiuintities  exported^  consumed^  and 

left  in  stockf  by  years,  191S-14  to  1917-18. 

(In  millions  of  bushels.] 


Crop  year. 

Stock  a  on 
Julyl. 

Crop.6 

Increase 

or 
decrease 
in  stock. 

Wheat 
used  and 
exported. 

Netc 
exports. 

Wheat 
used  in 
United 
States. 

1913-14 

lOS 
84 
62 

177 
55 
21 

763 
891 
1,026 
636 
637 

-  24 

-  22 
+115 
-122 

-  34 

787 
913 
911 
758 
671 

91 

259 

168 

126 

7 

696 
654 
743 
632 
664 

1914-15 

1915-16 

191&-17 

1917-18 

1918-19 

1 

■***•**••• 

«  Available  data  show  a  world  wheat  crop  which  did  not  vary  srreatlv  from  year  to  year  and  which  aver- 
aged practically  2J  billion  bushels  annually  for  the  7  years  beginning  with  1891.  In  1898  the  crop  jumped  to 
nearly  3  billion  bushels,  and  the  average  for  the  next  10  years  was  but  little  above  that  figure,  with  a  varia- 
tion of  less  than  15  per  cent  up  or  down  in  anv  one  year.  In  1909  the  crop  rose  to  over  3*  billion  bushels, 
and  it  did  not  fall  below  that  figure  again  imtil  the  beginning  of  the  European  war.  In  1913.  and  again  in 
1915,  the  crop  exceeded  4  billion  bushels.  Over  90  per  cent  of  this  wheat  is  produced  north  of  the  Equator. 
As  late  as  1915  the  United  States  produced  practically  one-fourth  of  the  entire  crop.  It  had  proauced  about 
the  same  proportion  of  the  total  crop  in  1891  and  in  liaoi.  These  three  years  were  the  high  points  in  its  con- 
tribution to  the  world's  supply  over  the  period  covered  by  available  data.  A  period  of  relatively  low  pro- 
duction in  this  country  covered  the  four  years  1893  to  1896,  inclusive.  Other  low-production  years  were 
1904, 1911,  and  1916.  In  none  of  these  years  did  the  crop  in  the  United  States  materially  exceed  one-sixth 
of  the  world  crop. 
Other  important  producing  countries  are  Russia,  Canada,  Argentina.  Australia.  Houmania,  and  British 
•  India.  The  averaee  annual  exports  of  these  countries  in  excess  of  their  imports  from  other  countries  (in- 
cluding flour  as  wheat)  in  the  five-year  period  just  prior  to  the  war,  1909-1913,  amounted  to  610  million 
bushels.    For  different  countries  they  were,  in  round  numbers,  as  follows: 

Russia 165  million  bushels. 

United  States 105  million  bushels. 

Canada 95  million  bushels. 

Argentina 85  million  bushels. 

Aastralia 65  million  bushels. 

Roumania 65  million  bushels. 

British  India SOmilUon  bushels. 

Eight  cotmtries  consumed  three-fourths  of  the  world's  supply  during  these  same  years.  Their  con- 
sumption was  as  follows: 

R'«sia 650  million  bushels. 

Umted  States 6S0  million  bushels. 

France 3rfl  million  bushels. 

British  India 300  mil  1  ion  bushels. 

United  Kingdom 275  million  bushels. 

Austria- Hungary 240milHon  bushels. 

Italy 235  million  bushels. 

Germany 220  milUon  bushels. 

Fotit  of  these  countries,  United  Kingdom,  Germany,  Italv.  and  France,  were  the  great  importing  coma- 
tries.  Their  average  annual  net  importations  of  wheat  during  the  five  years  preceding  the  war,  1909  to 
1913,  were  about  380  million  bushels.  I3elgium  was  importing  50  million  bushels  and  other  European 
countries  about  75  million  bushels  during  the  same  period. 

The  statistical  information  in  the  preceding  paragraph  was  taken  from  Documentary  I^eaflets  of  the 
International  Institute  of  Agriculture,  June,  1919,  pp.  14  and  15.  Data  available  in  regard  to  the  world 
supply  of  wheat  and  its  distribution  since  the  opening  of  the  Euroi>ean  war  are  very  incomplete. 

a  Based  on  the  United  States  Food  Administration's  compilation  of  data  collected  by  the  Qovemment 
and  trade  statistical  organizations, 
b  Statistical  Abstract,  1918,  p.  159. 
•  Ezolusive  of  flour.    Statistical  Abstract,  1918,  pp.  431,  478,  and  510. 


:^^^t: 


<i~^^r  s«"  -  «-;  «r  ■'^^nriii^MkiliH 


COSTS,   PRICES,   AND  PROFITS. 


93 


Before  proceeding  to  the  discussion  of  Table  28,  attention  should 
again  be  called  to  the  increase  in  the  country's  wheat  crop  referred 
to  on  page  12. 

In  recent  years  the  country  has  used  in  its  mills  and  otherwise 
90  million  bushels  a  year  more  than  it  produced  20  3'ears  ago,  and  the 
crop  of  10  years  ago  would  have  provided  no  wheat  for  export  except 
as  flour  during:  the  last  six  years.  Table  28  shows  that  the  remark- 
able increase  in  the  wheat  crops  of  the  United  States  culminated  in 
a  harvest  of  1,026,000,000  bushels  in  1915.  In  1916  the  crop 
amounted  to  636  million  bushels,  and  in  1917  to  637  millions:  in 
neither  year  was  it  much  more  than  60  per  cent  of  the  crop  in  1915. 

Gradually  increasing  stocks  had  been  held  over  from  tne  harvests 
preceding  that  of  1913.  As  a  result,  the  stock  on  hand  on  »]uly  1  of 
that  year  amounted  to  108  million  busnels  lo  this  there  was  added 
during  the  year  a  crop  of  763  million  bushels.  Under  these  circum- 
stances the  ordinary  means  of  disposing  of  wheat  failed  the  farmer, 
and  the  United  States  Food  xA.dministration  data  indicate  that  he 
increased  the  quantity  of  wheat  used  as  stock  feed  from  15  million 
bushels  in  the  preceding  year  to  55  million  bushels  in  1913-14.  He 
also  sold  his  wheat  for  79  cents  per  bushel,  or  6  cents  less  than  the  aver- 
age price  realized  from  the  1912  crop.  By  feeding  it  to  stock  and  soil- 
ing it  at  a  reduced  price  the  quantity  of  wheat  used  in  the  United 
States  in  1913-14  was  increased  to  696  million  bushels,  or  79  million 
bushels  more  than  the  consumption  in  the  preceding  3^ear.  Apparently 
the  low  price  and  the  use  of  wheat  as  stock  feed  was  discouraging  to 
the  spring-wheat  farmers,  who  reduced  their  wheat  acreage  appreciably 
in  the  spring  of  1914.  The  farmers  in  the  hard-wheat  States  of  the 
Southwest,  not  so  easily  discouraged,  put  milUons  of  acres  more  into 
wheat  in  the  fall  of  1913  than  ever  before.  Consequently,  there  was 
an  increase  in  the  crop  of  wheat  in  the  States  of  Colorado,  Kansas, 
Nebraska,  Oklahoma,  and  Texas  from  190,138,000  bushels  in  1913 
to  318,669,000  bushels  in  1914.  The  resulting  crop  of  891  million 
bushels  for  the  entire  country  made  it  possible  to  meet  the  extraor- 
dinary export  demands  of  the  opening  year  of  the  war  with  a 
reduction  in  stocks  from  the  beginnmg  to  the  end  of  the  crop  year, 
1914-15,  amounting  to  only  22  million  bushels. 

Ihat  year  the  average  price  realized  by  the  farmers  throughout 
the  United  States  advanced  to  99  cents,  and,  as  was  naturally  to  be 
expected,  the  acreage  sown  to  wheat  increased,  namely,  from  54,661,- 
000  in  1914  to  61,173,000  in  1915.  Yet  even  this  remarkable  acreage 
would  have  resulted  in  no  gteat  increase  in  stocks  had  it  not  been 
for  the  greatly  increased  yield  per  acre  in  the  hard  spring-wheat 
States  of  the  Northwest,  which  resulted  in  almost  doubling  the  crop 
harvested  in  Minnesota,  Montana,  North  Dakota,  South  Dakota, 
and   Wyoming.     The  good  fortune   of   the  spring-wheat   farmei-s. 


tv*:^.-=*6.-- 


94 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


though  offset  to  some  extent  by  a  decreased  yield  per  acre  in  the 
winter-wheat  States,  resulted  in  the  great  harvest  of  1915  noted  above. 
Heavy  crops  in  Canada,  Australia,  and  Argentina,  together  with 
favorable  conditions  of  transportation,  made  Europe  more  independ- 
ent of  the  United  States  in  the  following  year,  and  the  net  exports  of 
wheat  dropped  from  259  to  168  million  bushels.  Throughout  the 
larger  part  of  the  country  the  wheat  raised  was  of  poor  quality  and 
probably,  in  part,  for  that  reason  it  was  fed  to  live  stock  in  large 
quantities.  Nevertheless,  as  Table  28  shows,  the  stock  on  hand  was 
115  million  bushels  larger  on  July  1,  1916,  than  it  had  been  12  months 
earlier.  Total  consumption  in  the  United  States  had  increased  to 
743  million  bushels. 

In  the  face  of  this  accumulation  of  stock,  wheat  sown  in  1916  fell 
off  from  61  to  57  million  acres.  This  smaller  acreage,  accompanied 
by  a  lower  yield  per  acre,  resulted  in  the  extraordinary  reduction  in 
the  crop  already  referred  to.  Table  28  shows  that  the  wheat  crop 
of  1916  was  practically  all  consumed  in  the  United  States.  Early 
in  the  mill  year  1916-17  the  European  countries  engaged  in  the  war 
realized  for  the  first  time  the  extent  of  the  emergency  in  regard  to 
their  food  supplies.  Their  strenuous  efforts  to  provide  for  this  emer- 
gency resulted  in  the  wheat  and  flour  panic  of  the  spring  of  1917. 
Although  the  small  crop  made  it  necessary  to  reduce  shipments, 
net  exports  for  that  year  amounted  to  126  million  bushels.  As  a 
consequence  of  the  advance  in  prices  during  the  year,  the  reported 
average  price  realized  by  the  farmer  for  the  crop  of  1916  amounted 
to  $1.44.  Millers  were  ready  to  use  all  available  wheat  and  stocks 
went  down  more  than  they  had  gone  up  on  account  of  the  enormous 
harvest  of  1915.  Stocks  of  flour  measured  in  bushels  of  wheat  also 
fell  off  about  12  million  bushels. 

The  farmers  of  the  winter  wheat  section  had  put  in  their  wheat 
for  the  crop  of  1917  before  the  advance  in  prices.  Consequently, 
there  was  no  great  increase  in  the  acreage  sown  and  unfavorable  crop 
conditions  reduced  the  number  of  acres  harvested,  compared  with  the 
previous  year,  about  7  millions.  Although  the  spring-wheat  farm- 
ers increased  the  acreage  somewhat  and  the  yield  per  acre  was  better, 
the  entire  crop  showed  no  considerable  increase,  amoimting  to  only 
637  million  bushels.  The  table  shows  that  the  consumption  in  the 
United  States  that  year  exceeded  the  crop  raised  by  over  25  million 
bushels.  Nevertheless,  in  response  to  the  urgent  demand  from  Eu- 
rope, exports  in  excess  of  imports  amounted  to  7  million  bushels,  and 
reduced  the  stock  of  wheat  on  hand  at  the  end  of  the  five-year  period 
to  21  million  bushels. 

Table  28  furnishes  an  excellent  illustration  of  the  steadiness  of  the 
consumption  of  wheat  within  a  given  area  and  the  variability  of  the 
supply.     Maximum  consumption  of  wheat  shown  for  any  year  was 


< 

%' 


. 


> 


COSTS,  PRICES,  AND  PROFITS. 


95 


743  million  bushels  in  1915-16,  only  10  per  cent  above  the  average 
for  the  five  years.  The  minimimi  consumption,  632  million  bushels  in 
1916-17,  was  only  7  per  cent  below  the  average.  The  difference 
between  the  maximvun  and  the  minimum  consumption  was  111  mil- 
lion bushels,  but  the  difference  shown  between  the  largest  and  the 
smallest  crop  was  390  million  bushels. 

The  safety  valves  in  this  situation  are  net  exports  and  reserve 
stocks  which  are  continually  moving  up  and  down.  In  1914-15  net 
exports  were  37  times  as  much  as  in  1917-18,  and  the  reserves  of 
wheat  at  the  end  of  1915-16,  177  million  bushels,  were  more  than  8 
times  the  21  millions  left  at  the  end  of  1917-18. 

Estimates  of  the  annual  consumption  of  wheat  in  the  United  States, 
separated  into  feed  for  live  stock,  seed,  and  mill  consumption,  to- 
gether with  net  exports  of  flour  expressed  as  wheat,  are  shown  in 
the  following  table: 

Table  29. — Analysis  of  the  consumption  of  wheat  in  the  United  States ,  by  years,  1913-14 

to  1917-18. 

[In  millions  of  bushels.] 


Crop  year. 


1913-14. 
1914-15. 
1915-16. 
1916-17. 
1917-18. 


Total 
consump- 
tion.! 


696 
654 
743 
632 
664 


Fed  to 
stock.> 


55 
20 
74 
13 
13 


Used  for 
seed.2 


75 
84 
79 
82 
89 


Mill 
consump- 
tion.' 


566 
550 
590 
537 
562 


ExpOTted 
as  flour.* 


53.1 
72.5 
68.4 
53.0 
95.8 


1  See  Table  28. 

» From  compilation  by  the  United  States  Food  Administration. 

•  Includes  an  insis:niflcant  quantity  used  in  distilling. 

4  Statistical  Abstract,  1918,  pp.  431, 478,  and  510. 

The  mill  consumption  of  wheat  shown  in  Table  29  is  obtained  by 
subtracting  the  estimated  quantity  used  for  seed  and  fed  to  live 
live  stock  from  estimated  total  consumption.  By  this  method  the 
entire  waste  in  storage  and  transportation  is  apparently  included  in 
the  figures  for  mill  consumption,  which  also  covers  an  insignificant 
quantity  (which  has  no  effect  on  the  figures  expressed  in  millions) 
of  wheat  used  in  distilleries. 

According  to  the  census  the  merchant  mills  of  the  country  used 
545,728,431  bushels  of  wheat  in  1914.  This  is  96  per  cent  of  the 
amount  shown  above  as  used  in  mill  products  and  wasted  during  the 
mill  year  1913-14.  The  same  authority  shows  practically  the  same 
per  cent  of  a  corresponding  supply  figure  as  used  in  1904,  but  for  1909 
the  per  cent  shown  as  used  is  only  92.  For  the  year  1917-18  Food 
Administration  reports  show  93  per  cent  of  the  available  supply  indi- 
cated above  as  used  in  flour.  This  difference  is  probably  due  in 
considerable  part  to  consumption  by  custom  mills,  and  the  element 
of  waste  referred  to  in  the  preceding  paragraph,  but  it  also  empha- 


:«r<  !;,-■'«.«.■>!; 'aPW%-ji  >i!*-j.r  <f~^V 


96 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


COSTS,  PRICES,   AND  PROFITS. 


97 


sizes  the  fact  that  the  data  in  Table  22  are  only  the  best  available 
estimates. 

The  consumption  of  wheat  in  the  United  States  shown  for  1913-14 
in  Table  29  was  relatively  large,  as  might  have  been  expected  from 
the  accumulation  of  wheat  at  the  beginning  of  the  year,  already 
referred  to,  and  to  the  fact  that  the  average  price  realized  by  the 
farmer  from  the  1913  crop,  79  cents  per  bushel,  was  at  the  lowest 
point  reached  in  years — about  20  per  cent  lower  than  the  price 
five  years  earlier  and  less  than  40  per  cent  of  the  price  realized  from 
crops  of  1917  and  1918.  The  natural  consequences  of  this  situation 
are  shown  by  Table  29  in  the  larger  quantity  of  wheat  fed  to  live 
stock,  the  relatively  small  use  for  seed,  and  the  heavy  mill  consump- 
tion. The  quantity  of  export  shown  for  1913-14  by  the  table  indi- 
cates that  similar  conditions  prevailed  in  other  countries,  as  ship- 
ments of  flour  abroad  had  been  much  larger  in  earlier  years. 

The  figures  in  the  table  reflect  fairly  well  the  situation  that  devel- 
oped in  1914-15  because  of  the  war.  Due  to  the  very  large  exports 
of  wheat  in  that  year,  shown  in  Table  28,  the  farmers  found  it  un- 
profitable to  feed  so  much  wheat  to  live  stock  but,  on  the  contrary, 
increased  the  quantity  sown  from  75  million  to  84  million  bushels. 
Millers  found  their  cost  of  wheat  increased  considerably,  and  as 
the  demand  from  abroad  was  to  a  large  extent  for  wheat  as  dis- 
tinguished from  wheat  flour,  mill  consumption  decreased  from 
566  millions  to  550  millions  in  1914-15. 

Conditions  that  brought  about  the  increase  in  total  consumption 
to  743  million  bushels  in  1915-16  have  already  been  reviewed.  The 
enormous  crop  decreased  prices  in  spite  of  the  war  demand  and,  as 
was  to  be  expected,  the  farmer  increased  the  quantity  fed  to  live 
stock  and  decreased  the  quantity  sown.  It  is  probable  that  the  big 
increase  in  the  quantity  fed  to  live  stock  was,  as  already  noted,  due 
to  the  poor  quality  of  the  wheat  raised  in  1915  quite  as  much  as  to 
the  low  price.  Furthermore,  the  considerable  increase  shown  in  the 
mill  consumption  from  550  million  bushels  in  1914-15  to  590  million 
bushels  in  1915-16  was  not  due  to  the  larger  crop  throughout  the 
country  but,  in  a  considerable  degree,  to  the  excellent  quaUty  and 
the  very  large  production  of  hard  spring  wheat  in  1915.  The  de- 
clining exports  of  wheat  flour  in  1915-16  is  especially  to  be  noted 
in  connection  with  the  fact  that  Table  14  shows  a  decline  of  30 
cents  in  the  price  of  flour  received  by  the  millers  in  that  year,  while 
the  average  price  received  by  the  farmer  for  wheat  went  down  only 
1  cent  per  bushel. 

The  effect  of  the  noarly  40  per  cent  decrease  in  the  crop  of  1916 
as  compared  with  that  of  1915  is  clearly  shown  in  the  decline  of  total 
consumption  from  743  milUon  bushels  in  1915-16  to  632  million 
bushels  in  1916-17.     The  table  shows  the  effects  normally  to  be 


f 


expected  in  the  use  of  wheat  for  stock  and  in  increased  quantity 
used  for  seed.  In  spite  of  a  crop  390  million  bushels  short  of  that 
in  the  preceding  year  and  increase  in  the  cost  of  wheat  to  the  miller 
as  represented  by  the  37  companies  from  $1.12  per  bushel  to  $1.81, 
mill  consumption  decreased  only  53  million  bushels — to  537  millions. 
Export  of  flour  continued  to  drop,  reaching  the  same  figure  as  in 
1913-14. 

Data  for  the  year  1917-18  presented  in  Table  29  reflect  clearly 
the  critical  condition  in  that  year,  due  to  the  war.  The  use  of  13 
million  bushels  of  wheat  as  live-stock  feed,  in  spite  of  the  small 
crop  and  the  increase  in  total  consumption  to  664  million  bushels 
(see  Table  28),  indicates  that  even  under  conditions  of  very  great 
scarcity  in  the  wheat  supply  there  is  a  certain  proportion  of  the  crop 
that  can  not  be  milled  profitably.  The  increased  use  of  wheat  for 
seed  was  of  course  in  direct  response  to  appeals  for  the  largest  pos- 
sible production.  Neither  was  the  considerable  increase  in  the  mill 
consumption  to  562  million  bushels  in  1917-18  the  result  of  a  normal 
response  of  commercial  milling  to  the  conditions  of  scarcity  indicated 
by  the  increase  in  exports  of  flour  expressed  as  wheat,  from  53 
million  bushels  to  95.8  million  bushels.  Comment  has  already  been 
made  on  the  fact  that  in  this  year  the  production  of  many  large  com- 
mercial mills  was  very  considerably  decreased.  (See  p.  59.)  The 
increase  in  mill  consumption  shown  by  Table  29  was  therefore  due 
to  a  considerable  development  under  Government  regulation  of  the 
production  of  wheat  flour  in  mills  of  small  and  medium  size  through- 
out the  country. 

Wheat  used  per  barrel  of  flour. — The  quantity  of  wheat  used  in  pro- 
ducing a  barrel  of  flour  and  the  cost  of  wheat  per  bushel  and  per 
barrel,  for  the  37  companies  and  for  the  different  groups,  is  shown, 
by  years,  from  1913-14  to  1917-18,  in  the  following  table: 

Table  30. — Wheat  costs  of  the  37  companies,  by  years,  1913-14  to  1917-18. 


1913-14 

1914-15 

1915-16 

1910-17 

1917-18 

Wheat  used  (bushels  oer  barrel) 

4.42 

4.52 

4.54 

4.60 

4.44 

Northwestern  group 

4.40 
4.51 
4.48 

4.52 
4.51 
4.51 

4.53 
4.59 
4.56 

4.64 
4.53 
4.52 

4  4fi 

Southwestern  ctoud 

A    Vk 

Eastern  crouD 

4. 48 

Cost  of  wheat  used  fDer  bushel) 

$0.90 

11.20 

$1.12 

$1.81 

$2.19 

Northwestern  group 

.89 
.86 
.95 

1.22 
1.09 
1.22 

1.10 
1.08 
1.23 

1.84 
1.67 
1.80 

2.18 
2  15 

Southwestern  group 

Eastern  group 

2.26 

Cost  of  wheat  per  barrel  of  flour 

3.96 

5.42 

5.09 

8.32 

9.72 

Northwestern  group 

3.90 
3.90 

4.28 

5.52 
4.90 
5.50 

4.99 
4.97 
5.63 

8.65 
7.56 
8.16 

4  M 

Southwestern  group 

9.77 
in  fi 

Eastern  groun 

183256°— 20 7 

■ 

:■;■*.'■'   • 


98 


COMMERCIAL  WHEAT-FLOUR   MILLING. 


The  data  in  Table  30  confirms  the  well-established  presumption 
that  a  barrel  of  good  flour  can  be  made  from  4J  bushels  of  wheat. 
Taken  in  connection  with  the  census  figures  referred  to  on  page  13, 
which  show  an  average  consumption  for  the  United  States  of  4.7 
bushels  per  barrel,  they  make  it  fairly  certain  that  the  commercial 
mills  use  less  wheat  per  barrel  of  flour  ground  than  the  smaller 
neighborhood  mills.  This,  of  course,  is  only  confirmatory  of  the 
accepted  opinion  that  the  superior  equipment  of  the  large  mills 
gives  them  an  advantage  in  this  respect  over  the  small  mills. 

The  considerable  variation  in  the  wheat  used  per  barrel  of  flour  in 
different  years  and  by  different  groups  is  the  result  of  so  many  more 
or  less  conflicting  causes,  that  only  a  brief  reference  to  some  of  the 
more  important  is  feasible  in  this  report.  The  table  shows  that 
considerable  more  wheat  was  used  per  barrel  of  flour  in  the  inter- 
mediate years  1914-15  to  1916-17  than  in  1913-14  and  1917-18. 
The  considerable  decrease  in  the  quantity  per  barrel  used  in  1917-18 
was  the  direct  effect  of  the  Government's  requirement,  over  a  good 
part  of  the  year,  that  only  4.4  bushels  of  wheat  should  be  used  per 
barrel  of  flour. 

General  market  information  indicates  that  an  increasing  demand 
for  the  higher  grade  of  patent  flour  on  the  one  hand,  and  for  meats 
and  dairy  products  on  the  other,  might  have  had  something  to  do 
with  this  increased  consumption  of  wheat  per  barrel  of  flour  in  1915-16 
and  1916-17.  Increased  demand  for  meats  and  dairy  products 
must  necessarily  reflect  itself  in  an  increased  demand  for  feed,  and 
the  more  feed  a  miller  takes  from  a  bushel  of  wheat  the  less  flour  will 
remain. 

^  Data  in  regard  to  the  quantity  and  quaUty  of  the  wheat  harvest 
m  different  years  indicate  that  changes  in  these  two  factors  were 
more  mfluential  than  changes  in  demand  for  different  mill  products 
in  bringing  about  the  increase  in  wheat  used  per  barrel  of  flour  in 
different  years  and  different  sections.  For  example,  the  increase  in 
1915-16  for  the  37  companies  coincides  with  the  bilHon-bushel  crop 
and  the  prevalence  of  excessive  moisture  in  most  of  the  wheat  .  ar- 
vested.  In  1916-17,  apparently  because  of  decreased  supply  (see 
p.  95)  the  East  and  the  Southwest  used  less  wheat  per  barrel  than  the 
year  before,  but  in  spite  of  a  very  short  crop  in  the  Northwest  that 
group  used  considerably  more  than  in  1915-16.  The  poor  quality 
and  light  weight  of  the  hard  spring  wheat  raised  in  1916  probably 
explains  why  the  Northwestern  group  used  4.64  bushels  of  wheat 
per  barrel  of  flour  ground  in  1916-17. 

Cost  of  wheat  per  bushel— Table  30  shows  that  the  average  cost  of 
•wheat  for  the  37  companies  was  more  than  twice  as  much  in  1916-17 
as  in  1913-14.    A  fact  not  shown  by  the  table  is  that  the  price  in 


COSTS,  PRICES,   AND  PROFITS. 


99 


,_;c 


the  last  part  of  the  mill  year  1916-17  was  over  three  times  what  it 
had  been  at  its  beginning.  The  success  of  the  Government's  efforts 
to  stabilize  wheat  prices  is  shown  by  the  increase  of  but  little  over  20 
per  cent  in  the  average  cost  to  the  mills  from  1916-17  to  1917-18. 

The  Eastern  and  Southwestern  groups  show  higher  relative  costs 
in  1915-16  than  might  be  expected;  that  is,  they  do  not  go  down 
like  those  of  the  Northwest.  Of  course,  the  remarkable  increase  in 
the  crop  of  the  Northwest,  together  with  the  poor  quality  and  high 
percentage  of  moisture,  which  increased  the  quantity  used  per  barrel 
in  other  sections  of  the  country,  had  much  to  do  with  holding  up  the 
relative  cost  per  bushel  for  the  Eastern  and  Southwestern  groups. 

The  cutting  of  the  1916  Northwestern  crop  to  but  little  over  a 
third  of  what  it  was  in  1915  explains  why  the  cost  of  wheat  used  by 
the  Northwestern  group  in  1916-17  was  even  higher  than  that  paid 
by  the  Eastern  group.  It  is  also  undoubtedly  true  that  a  part  of 
this  difference  is  due  to  the  difference  in  the  mill  year  repeatedly 
referred  to. 

In  1917-18  under  Government  stabilization  of  wheat  prices  the 
respective  costs  of  wheat  per  bushel  for  the  three  groups  show  about 
the  variations  to  be  expected  from  differences  in  transportation  costs. 

Further  light  on  the  variations  in  cost  per  bushel  of  the  different 
groups  is  furnished  by  sectional  variations  in  the  crops.  The  short 
crop  of  1914  in  the  Northwest  and  the  heavy  crop  in  the  Southwest 
are  plainly  reflected  in  an  increase  in  the  cost  per  bushel  for  the 
Northwest  over  40  per  cent  greater  than  for  the  Southwest  in  1914-15. 
Superior  availability  for  export  to  Europe  apparently  held  up  the 
relative  value  of  eastern  wheat  in  spite  of  the  increasing  output. 

Cost  of  wheat  per  barrel  of  flour. — ^The  discussions  of  crop  and  market 
conditions  have  already  given  the  general  causes  of  the  increase  in 
the  cost  per  barrel  by  $1.46,  or  over  35  per  cent,  in  1914-15.  The 
drop  of  33  cents  the  next  year  resulted  from  the  immense  crop  of 
1915  and  the  great  reduction  in  exports  of  wheat. 

The  salient  facts  are  that  after  two  years  of  war,  wheat  cost  the 
millers  only  about  30  per  cent  more  than  it  did  prior  to  the  war,  but. 
that  in  the  two  succeeding  years  short  crops  and  submarines,  rein- 
forced to  some  extent  by  various  other  factors,  forced  an  advance 
to  nearly  150  per  cent  above  the  prewar  level. 


/•-  -.  ■»M«iW»*'ii.?wreS4fcfe*'  *  :  . 


■^ii»k  AS*  ^-.«..' 


•  **«?>  ver»^ 


'^^'«"^^§«s?*t^:j*ii^,*j^.^ 


I  :-'»X 


100 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


Cost  of  packages. — The  cost  of  packages  per  barrel  of  flour,  for 
the  37  companies  and  the  different  groups,  by  years,  from  1913-14  to 
1917-18,  is  shown  in  the  following  table: 

Table  31. — Coat  of  packages  per  barrel  of  flour  of  the  37  companies^  by  groups  and  by 

years,  1913-U  to  1917-18. 


37  companies 

Northwestern  group 
Southwestern  group 
Eastern  group 


1913-14 


Cents. 


27 
27 
26 
29 


1914-15 


Cents. 


23 
23 
22 
25 


1915-16 


CenUt. 
21 
25 
22 
25 


1916-17 


Cental. 
31 
32 
2S 
32 


1917-18 


Cents. 


47 
46 
48 
47 


According  to  Table  31,  the  cost  of  packages  for  the  different  groups 
shows  no  such  difference  as  the  cost  of  wheat.  When  the  variety  of 
containers  in  which  flour  is  sold  is  considered,  and  also  the  sales  in 
bulk,  the  similarity  of  package  costs  per  barrel  is  remarkable.  Be- 
cause of  the  large  use  of  cotton  bags,  the  figures  reflect  the  immedi- 
ate effect  of  the  war  in  cutting  down  the  price  of  cotton  of  the  crop 
of  1914,  but  they  did  not  increase  nearly  as  much  from  1914-15  to 
1917-18  as  the  higher  price  of  cotton  would  lead  one  to  expect. 
Whether  the  costs  of  sacks  as  compared  with  cotton  and  jute  were 
relatively  high  in  the  earlier  years  does  not  appear  from  the  available 
data. 

It  was  not  feasible  to  make  any  general  revision  of  cost  of  packages 
as  reported  by  the  companies.  In  some  cases  where  important 
changes  from  actual  cost  were  found,  corrections  were  made.  It  did 
not  appear  probable  that  the  large  amount  of  work  that  a  careful 
revision  of  inventories  would  require  would  make  any  considerable 
changes  in  the  table  as  presented  above. 

Operating  costs,  including  repairs  and  depreciation. — Oper- 
ating costs  in  making  a  barrel  of  flour,  including  labor  expenses,  power 
and  fuel  expenses,  and  miscellaneous  expenses  directly  connected 
with  making  the  flour,  together  with  charges  for  repairs  and  deprecia- 
tion, are  shown  for  the  37  companies  and  for  the  different  groups,  by 
years,  from  1913-14  to  1917-18,  in  the  following  table: 

Table  32.— Operating  costs  per  barrel  of  flour ,  including  repairs  and  depreciation,  of  the 
37  companies,  by  groups  and  by  years,  191.3-14  to  1917-18. 


37  companies 

Northwestern  group . 
Southwestern  group . 
Eastern  group 


1913-14 


Cent^. 
22 
20 
28 
27 


1914-15 


Cents. 


22 
21 
25 
25 


1915-16 


Cents. 
21 
20 
25 
25 


1916-17 


Cents. 


28 
26 
28 
34 


1917-18 


Cents. 


37 
36 
37 
37 


Table  32  shows  no  appreciable  increase  in  the  cost  of  operation, 
including  repairs  and  depreciation,  during  the  first  three  years  of  the 
period  covered,  either  for  the  37  companies  as  a  whole  or  for  either 
of  the  groups. 


\       I 


a 


\ 


^ 


A 


costs,  prices,  and  profits. 


101 


In  1916-17  the  effects  of  the  war  began  to  make  themselves  evi- 
dent. It  should  be  remembered,  however,  that  the  average  expenses 
as  given  in  the  table  do  not  show  the  changing  conditions  throughout 

the  year. 

The  operating  expenses  shown  for  1917-18  were  65  per  cent  greater 
than  they  were  before  the  war  and  for  more  than  two  years  after  it 
started.  Under  Government  regulation  of  the  flour  industry  the  cost 
of  operation  was  practically  the  same  in  all  groups. 

The  lower  cost  shown  above  for  the  Northwest,  during  the  first 
four  years,  may  have  been  due  in  part  to  the  advantages  of  large 
scale  production  (see  p.  59).  Thus  the  charge  for  depreciation  m  the 
Northwest  was  over  a  cent  per  barrel  less  than  for  the  Eastern  group 
of  mills.  Nevertheless,  the  greater  increase  in  the  costs  of  operation 
in  the  Northwest  brought  them  practically  to  a  level  with  those  of 

the  other  groups  in  1917-18. 

Operating  costs  for  the  Northwest  were  increasmg  rapidly,  even  m 
1915-16,  when  the  tables  show  a  decrease  per  barrel.  A  heavy 
increase'  in  expenses  in  that  year  was  more  than  ofl'set  in  the  per 
barrel  figures  by  an  increase  of  nearly  25  per  cent  in  the  production. 
The  change  in  output  for  the  two  other  groups  was  not  sufficient  to 
have  any  effect  on  the  per  barrel  data.  Thus  the  total  expenses  for 
repairs  decreased  slightly  for  each  of  the  smaller  groups,  but  increased 
from  S636,000  in  1914-15  to  $789,000  in  1915-16  for  the  North- 
western group  without  any  appreciable  change  in  the  cost  per  barrel. 

It  was  impossible  to  analyze  the  expense  accounts  of  the  different 
mills  in  sufficient  detail  to  determine  the  causes  of  these  changes  m 
the  operating  expenses  of  the  different  groups.  It  does  appear,  how- 
ever, that  the  bulk  of  the  advance  in  costs  for  the  Northwestern 
group  in  1916-17  was  incurred  by  the  four  companies  which  have 
the  largest  output.  The  company  which  showed  the  greatest  mcrease 
in  output  had  a  heavy  increase  in  per  barrel  expense  for  power  and 
fuel.  For  the  company  showing  the  second  largest  increase  m  these 
expenses,  the  expenses  involving  labor  or  other  local  charges  appar- 
ently increased  less  than  those  of  a  more  miscellaneous  character, 
such  as  supplies  brought  in  from  a  distance. 

General  and  selling  expenses  per  barrel  of  flol^.— A  table 
showing  general  and  selling  expenses  for  the  37  companies  and  for  each 
group  year  by  year  durmg  the  five-year  period  is  presented  below: 

Table  ZZ.-General  and  selling  expenses  per  barrel  of  flour  of  the  37  companies,  by 

groups  and  by  years,  1913-14  to  1917-18. 


37  companies 

Northwestern  group. . 
Southwestern  group . . 
Eastern  group 


1913-14 


Cents. 
30 
30 
25 
34 


1914-15 

1915-16 

1916-17 

1917-18 

Cents. 

Cents. 

Cents. 

Cents. 

33 

31 

42 

41 

34 

31 

44 

42 

25 

24 

31 

36 

32 

35 

44 

41 

emstmrna* 


102 


COMMERCIAL   WHEAT-FLOUR   MILLING. 


As  in  the  case  of  operating  expenses,  it  is  not  practicable  to  give 
a  full  analysis  or  explanation  of  these  items.  It  is  interesting  to 
note,  however,  certain  contrasts  between  the  figures  for  the  different 
groups  and  also  certain  contrasts  with  the  operating  cost  shown 'in 
Table  32. 

The  figures  for  1916-17  show  the  effect  on  the  general  and  selling 
expense  of  the  remarkable  prosperity  of  the  mills  in  that  year.  In 
spite  of  the  advancing  prices,  Table  32  shows  that  the  Northwestern 
group  had  an  increase  in  operating  ccst  of  only  6  cents  per  barrel, 
but  Table  33  shows  that  general  and  selling  expenses  were  increased 
by  13  cents  per  barrel.  This  reflects  very  considerable  additions  to 
the  salaries  paid  the  managers  of  the  business  and  the  managers  of 
important  branch  houses. 

The  full  influence  of  large  profits  on  the  general  and  selling  expenses 
of  the  Southwestern  group  was  not  felt  until  1917-18.  In  that  year 
these  expenses  advanced  50  per  cent  over  those  of  two  years  before. 
Nevertheless,  the  general  and  selling  expenses  of  this  group  over  the 
entire  period  afforded  no  exception  to  the  general  rule  that  costs  for 
the  three  groups  tended  to  approach  each  other.  In  1913-14  general 
and  selling  expenses  for  the  Southwestern  group  had  been  5  cents 
per  barrel  below  the  averr.ge  and  in  1917-18  the  same  difference 
persisted.  Of  coui-se,  this  corresponds  to  a  smaller  percentage  dif- 
ference from  the  averjige  in  the  last  year  thnn  in  the  first.  While 
these  expenses  for  the  Eastern  group  were  4  cents  higher  than  for 
the  Northwestern  group  in  1913-14,  in  1917-18  they  were  higher  for 
the  Northwestern  thun  for  the  Eastern. 

Operating,  selling,  and  general  expenses. — Operating  ex- 
penses combined  with  general  and  selling  expenses  for  the  37  com- 
panies and  each  of  the  groups,  by  years,  from  1913-14  to  1917-18, 
are  shown  in  the  following  table: 

Table  34.— Total  operating,  selling,  and  general  expenses  per  barrel  of  flour  of  the 
37  companies,  by  groups  and  by  years,  1913-14  to  1917-18. 


37  companies 

Northwestern  group 
Southwestern  group 
Eastern  group 


1913-14 


Cents. 
52 
50 
51 
61 


1914-15 


Cents. 
55 
55 
50 
57 


1915-16 


Cents. 
52 
51 
49 
60 


1916-17     1917-18 


Cents. 


70 
70 
59 

78 


Cents. 


78 
79 
72 
78 


This  table  confirms  the  fact  already  noted,  that  the  costs  of  mak- 
ing and  selling  flour  increased  much  more  slowly  than  the  cost  of 
the  materials  and  supplies  used  in  its  manufacture.  While  it  shows 
an  advance  of  practically  50  per  cent  in  the  costs  of  making  and  sell- 
ing the  flour,  an  advance  which  amounts  to  only  26  cents  for  each 
barrel  of  flour,  Table  27  shows  an  advance  of  $5.96  in  the  cost  of 
the  wheat  used  and  packages  required. 


V 


I 


i 


COSTS,   PRICES,   AND  PROFITS. 


103 


The  variation  in  cost  of  making  and  selling  flour  for  the  different 
groups  in  1913-14  was  11  cents,  but  in  the  last  year  of  the  period  it 
had  decreased  to  7  cents,  'n  1913-14  these  costs  for  the  South- 
western group  were  1  cent  more  than  for  the  Northwestern  group. 
Tn  1917-18  costs  for  the  Northwestern  were  7  cents  more  than  those 
for  the  Southwestern.  Of  this  7  cents  difference,  6  cents  is  accounted 
for  by  the  excess  of  general  and  selling  expenses  of  the  former  group 
over  those  of  the  latter  in  1917-18. 
Section  11.  Relative  efficiency  of  flour-milling  companies. 

Quantity  of  output  is  generally  regarded  as  an  important  element 
in  the  efliciency  of  commercial  operation.  :  ndeed,  from  the  discus- 
sion of  localization  and  concentration  of  the  wheat-flour  milling: 
industry  in  Chapter  T,  it  appears  that  in  the  Ignited  States  mills  of 
less  than  100,000  barrels  output  have  for  years  been  declining  in 
imi)ortance,  probably  because  they  have  been  unable  to  compete 
successfully  with  the  larger  concerns.  The  data  reviewed  there  gave 
no  indication,  however,  as  to  the  relative  efficiency  of  companies 
having?  an  output  of  over  100,000  barrels,  and  it  is  important,  there- 
fore, to  consider  the  information  afforded  by  the  accounts  of  the 
companies  considered  above  which  relates  to  this  question. 

The  information  in  regard  to  some  of  the  companies  is  of  such  a 
character  that  it  is  more  satisfactory  for  use  in  consolidated  form, 
as  in  the  precedin^^  parts  of  this  chapter,  but  the  broader  facts 
obtained  by  a  comparison  of  different  groups  of  these  companies 
over  a  five-year  period  have  presumably  general  validity.  The 
abnonnal  condition  prevailing  in  1916-17  and  1917-18,  however, 
exercised  a  disturbing  influence  on  competitive  conditions  which  may 
have  altered  somewhat  the  ordinary  relations  between  companies  of 
different  size  or  different  character  of  plant  and  equipment. 

One  of  the  best  indications  of  competitive  efficiency  is  the  rate  of 
profit  on  investment.  Low  cost  is  also  an  indication  of  efficiency, 
but  a  low-cost  concern  may  not  have  a  very  high  rate  of  return 
where  such  low  cost  depends  on  large  plant  investment.  Neverthe- 
less, low  cost  may  be  a  factor  that  will  enable  a  concern  to  weather 
the  most  severe  price  competition,  but  if  the  investment  is  relatively 
large  it  wiU  tend  to  keep  down  the  rate  of  return  when  prices  are 

higher. 

The  following  table,  which  covers  the  total  operations  for  the  five- 
year  period  presented  in  previous  tables,  groups  the  38  ^^  companies 
according  to  volume  of  sales  and  compares  the  investment,  net  earn- 
ings, and  the  ratios  between  them.  It  also  compares  the  costs, 
profits,  and  the  investment  per  barrel  of  flour. 

fl  One  company  which  was  absorbed  by  another  at  the  end  of  the  period  was  separately  operated  and  is 
treated  as  a  separate  company  in  this  table. 


r 


'fSmBTissi'i^aKarjw, 


a 


104 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


''"^"difveVd^^^^^^^  together  .itk  costs,  projlts, 

volume  0/ sales,  five-year  peVd  WU-^^^^^^  compames  grouped  according  to 


Niim- 
bor  of 
oom- 


Barrels 
sold. 


Group  I: »  Over  1,000,000  barrels. 
Group  II:  300,000  to  700,000  bar- 
rels 


Group  III:  Under  mooo"  bar- 
rels  


7 
14 
17 


Invest- 
ment. 


Total. 


38 


28,462,159 
6,831,837 
3,283,778 


Earnings. 


Rate  of 
earn- 
ings on 
invest- 
ment 


Cost 
per 


Profit 
per 


barrel,  barrel 


W3, 489, 771   $9,691,270 


9,118,757 
4,774,209 


2,125,767 
946,623 


38, 577, 774     57, 382, 737  112, 763, 660 


PcTCt. 
22.2 

23.3 

19.8 


22.2 


$6.30 
6.14 
6.49 


$0.34 
.31 
.29 


6.29 


,33 


Invest- 
ment 
per 
barreL 


$1.53 
1.33 
1.45 


1.49 


aggregates  and  averaePs  do  w  « JnP.l,Y51?^*  practicable  m  this  grouping  accordi,,..  tn  ci,„  „?.?.L!'^.®^ 


*f  fn^'f  h'  "^^  ^'  "'^e^^  ^o  ^ot  e^'-^^tV  agree      *'*-^'"^-"'»'  "»  ^"^^  grouping  according  to  size7soVharth^ 
Includes  one  company  with  sales  slightly  under  1,000,000  barrels. 

The  most  strikinor  fact  shown  by  this  table  k  ih^  nr.r^         .-     i 
small  difference  in  the  average  rate'of  pro^ltr  Ve  diS„T,t;;? 

I  fT^n^  '"'""  P"""  •=*">^P*"y  ™"ning  from  300  000  to  700  000 
barrels  had  the  highest  rate  of  profit  (23.3  per  cent).  The  ™  S 
the  smallest  sales  per  company  had  the  lowest  rate  (19  8^er  ceTtf 

1.;        *i!      '         '       *  ^  company  were  ehniinated  from  the  com 
par  son  the  average  rate  of  profit  of  this  group  would  be  2^  .er  TeTt 
Of  considerable  mterest  also  are  the  figures  for  co^t    L^t,        J 
mvostment  per  baiTel.     Groun  If  showo  Wwl    i         . '  ^°^^'  *'''' 
r««  l/l^  „„,i  *i.    1       \  P    ' ''"'-"^^  "Otn  the  lowest  averas-e  cost 

(86^14)  and  the  lowest  average  investment  ^$1.33)  per  barrfr  ^f 
profit  per  barrel  (31  cents),  however,  was  less  than  tWeraT  'tL 

Ehest^heH  T"'"''"^"'  ^'^'^  ^^""P  -  '"-ady  shorwasIJe 
highest.     The  third  group  showed  the  highest  cost  per  barrel  7«fi  i. 
the  lowest  profit  per  barrel  ^'>o  cenf«^   J^a        ■      P.  (86.49), 

somewhat  under  'the  avT^e     "^^Zt  1^X7"*  T  '*'"''' 

CLz  z::z\:-£r^^T?  a^r^Janr  b^  t 

bad  a  eonsW  Srcost^t  tLf  (sTa^tt  tV^a 
somewhat  higher  average  ,.rofit  per  barrel  (34  cents^and  a  m,  '^ 
higher  average  investment  per  barrel  (SI. 53)      Its  rate  TJ 
investment  therefore  was  slightly  lower  than  that  of  Croup    P  T 
already  pointed  out,  if  one  comnanv   which  o,.Pr„tL      ?  '^^ 

tional  conditions  apparently,  an";  ^ith  a  t^      f'f  St^^^^^^ 
^iminated  from  this  group  its  rate  of  profit  would  be  siS  1111? 
than  that  of  the  second  group.     It  may  be  noted  that  ^.K 
change  the  cost  per  barrel  would  be  reducll  to  S6      and  thT  nv^T 


y 


COSTS,  PRICES,  AND  PROFITS. 


105 


ment  per  barrel  to  Sl.32,  though  the  i)rofit  per  barrel  would  remain 
substantially  the  same. 

Considering  facts  presented  above  and  without  ascribino^  a  very 
lugh  degree  of  accuracy  to  the  data,  it  seems  reasonable  to  conclude 
that  size  is  not  a  decisive  factor  in  determining  the  commercial  effi- 
ciency of  the  larger  wheat-flour  milling  companies. 

Section  12.  Wheat-flour  milling  in  Washington  and  Oregon. 

Idaho,  which  has  been  grouped  with  WasPiin^ton  and  Ore<^on  in 
tabulations  ol  wheat  and  flour  production  in  this  report,  has  no  mills 
of  any  considerable  conunercial  importance.    Jn  fact,  there  is  no  dis- 
tinctly segregated  wheat-flour  industrv  in  the  two  coast  States      The 
important  milling  concerns  are  also  the  important  wheat-marketing 
concerns.     Their  problem  is  to  dispose  of  the  surplus  wheat  produced 
in  that  section  in  the  most  profitable  form,  whether  that  be  flour 
cereal  foods,  feeds,  or  grain.     How  much  more  important  wheat 
marketing  is  on  the  Northwest  coast  than  in  the  rest  of  the  country 
IS  strikingly  illustrated  by  the  harvest  of  1917.     Outside  of  these 
three  States  the  United  States  in  that  year  produced  hardly  enou-h 
wheat  to  supply  its  mills  and  to  seed  its  fields.    But  even  in  that  low- 
crop  year  Washington,  Oregon,  and  Idaho  harvested  not  far  from 
twice  the  wheat  they  consumed  in  both  these  ways. 

Attention  has  already  been  called  to  the  rapid  development  of 
milling  in  the  Pacific  Northwest  because  of  its  abundant  wheat 
supply.  (See  p.  23.)  From  1913-14  to  1917-18  the  mills  whose 
accounts  were  used  by  the  Commission  increased  their  output  some- 
what,  while  the  output  in  other  sections  of  the  country  fell  off 

The  data  presented  below  do  not  show  the  progress  of  a  strictly 
comparable  group  during  the  five  years.  It  covers  the  flour  sales  of 
14  companies  m  the  first  three  years,  15  in  the  fourth,  and  16  in  the 
fifth.  These  companies  sold  3,659,917  barrels  of  flour  for  S13  283 
265.10  in  1913-14  and  4,590,600  barrels  for  S40,407,901.S6  in  1917-  LS 
It  has  not  been  possible  to  revise  these  accounts  as  thorouohly  as 
those  of  the  37  companies.  Probably  the  most  unsatisfactory  point 
m  this  regard  was  the  impracticability  of  revising  inventories  taken 
at  market  value  instead  of  cost. 

The  flour  accounts  showed  receipts  per  barrel  of  flour  as  follows- 
In  1913-14,  $3.83;  1914-15,  $4.86;  1915-16,  $4.47;  1916-17,5^0  27.* 
1917-18,  $9.47.  As  in  the  case  of  the  37  companies,  these  flour 
accounts  contained  some  debits  and  credits  aside  from  cash  receipts 
for  flour  and  cash  discounts.  These  prices  may  be  accepted  how- 
ever,  as  comparable  from  year  to  year,  and  it  is  therefore  safe  to  say 
that  the  flour  made  in  the  Pacific  Northwest  sold  for  neariy  150  per 
cent  more  per  barrel  in  1917-18  than  in  1913-14.  The  average  annual 
mill  value  of  the  flour  sold  in  the  Pacific  Northwest  ran  from  32  cents 


.  "> 


106 


COMMERCIAL  WHEAT-FLOUR  MILLING. 


to  $2.28  below  the  mill  value  of  the  eastern  flour.  The  advance  be- 
cause of  the  flour  panic  in  the  spring  of  1917  was  less  than  it  was  even 
in  hard  winter  wheat  flour.     (See  p.  84.) 

It  is  impracticable  to  discuss  in  this  report  the  many  factore  that 
influence  the  prices  received  by  millers  in  the  Pacific  Northwest.  A 
few  of  the  more  important  may  be  listed  as  follows: 

1.  Competition  in  their  own  home  market  with  the  Montana  hard 

spring  wheat  mills. 

2.  Competition  in  California  and  the  Southwest  with  the  hard 
winter  wheat  mills  of  the  Southwestern  group, 

3.  Competition  in  the  cotton  States  with  the  soft  wheat  mills  of 

the  Eastern  group. 

4.  Fluctuations  in  demand  for  flour  in  the  Orient  and  South 

America. 

It  was  not  practicable  to  separate  the  investment  in  flour  milling 
from  the  investment  in  the  cereal,  feed,  and  grain  enterprises  of  the 
concerns  whose  accounts  were  used.  The  per  barrel  mvestment 
figure,  mcluding  these  subsidiary  branches  of  the  business,  is  the 
figure  that  is  of  practical  importance  and  represents  correctly  "^he 
amount  of  capital  employed  per  barrel  of  flour  sold  in  the  Pacific 
Northwest.  This,  therefore,  is  the  figure  that  should  be  used  for 
comparison  with  the  more  strictly  wheat  flour  investment  already 
shown  for  the  eastern  mills. 

In  1913-14  the  mvestment  computed  per  barrel  of  sales  for  the 
Pacific  Northwest  was  $2.50;  nearly  50  per  cent  more  than  was  shown 
for  the  Eastern  group,  and  consideral)ly  over  twice  what  was  used 
in  the  hard  spring  wheat  mills.  There  was  no  such  increase  there 
during  the  five-year  period  as  in  the  East.  Indeed  the  Pacific  group 
shows  an  increase  of  barely  10  per  cent  during  the  five  years,  in  con- 
trast to  the  increase  of  67  per  cent  for  the  37  companies.  While  the 
reason  for  this  difference  is  not  clear  it  appears  probable  that  Gov- 
ernment operations,  which  assured  a  market  without  the  maintenance 
of  grain,  feed,  and  export  departments  on  the  same  scale  as  in  former 
years,  was  the  most  important  factor.  Another  factor  of  consid- 
erable importance,  however,  was  a  greater  mcrease  in  the  use  of 
short-time  loans  not  counted  as  investment. 

The  character  of  the  data  obtained  made  it  impossible  to  compute  a 
satisfactory  cost  for  wheat  flour.  The  only  practical  method  was 
to  proceed  as  with  investment  and  charge  all  income  and  all  ex- 
penses to  the  flour  account.  It  was  the  net  income  thus  obtained 
which  was  used  in  computing  the  rate  of  return  on  investment  and 
also  the  net  income  per  barrel  of  flour  sales. 

The  changes  in  rate  of  return  on  investment  fluctuate  directly 
with  the  corresponding  figure  for  eastern  mills.  Starting  roughly 
at  6  per  cent  in  1913-14,  they  were  three  times  that  rate  in  the  next 


^ 


I 


*« 


\ 


COSTS,  PRICES,   AND  PROFITS. 


10' 


year,  dropped  back  to  8  per  cent  in  1915-16,  showed  a  nearly  four- 
fold increase  the  next  year,  to  31  per  cent,  but  fell  to  21  per  cent 
in  1917-18. 

The  changes  in  per  barrel  profits  were  approximately  parallel  to 
those  in  the  rate  of  return  on  investment.  In  1913-14  they  were 
15.5  cents;  m  1914-15,  52.6  cents;  in  1915-16,  24.8  cents;  in  1916-17, 
85.7  cents;  and  in  1917-18,  58.7  cents.  This  group  made  2 J  times  the 
profit  per  barrel  that  was  made  by  the  37  companies  in  1914-15. 
The  profit  per  barrel  was  greater  than  that  made  by  the  37  com- 
panies on  account  of  the  largo  miscellaneous  business,  but  largo 
investment  resulted  in  the  low  rate  of  return  already  noted. 

The  European  war  was,  of  course,  the  primary  factor  in  the  increase 
in  profits.  It  took  increased  exports  of  wheat  out  of  a  decreased  crop 
in  the  Pacific  Northwest.  The  resulting  scarcity  of  wheat  in  that 
section  raised  prices  of  feeds  and  miscellaneous  products  so  that  the 
net  cost  of  flour  per  barrel  was  kept  down  and  in  that  way,  though 
the  price  of  flour  went  up  only  $1.03  per  barrel  compared  with  an 
advance  of  $1.40  for  the  37  companies,  the  net  effect  was  the  much 
larger  net  profit  referred  to  above. 

The  relatively  low  rate  of  profit  per  barrel,  and  on  investment, 
in  1915-16  was  probably  due  to  more  competition  from  the  East, 
because  of  the  great  increase  in  business  done  b}^  the  hard  spring 
wheat  States  in  that  yea,v.  Because  of  the  impracticability  of 
putting  the  inventories  of  these  companies  oa  a  cost  basis,  com- 
parisons are  safer  when  the  profit  figures  for  the  last  two  years  are 
combined.  When  this  is  done  the  resulting  profit  per  barrel  of  flour 
is  found  to  be  (as  in  the  first  year  of  the  five)  somewhat  higher  than 
for  the  37  companies  but  the  rate  realized  on  investment  consider- 
ably lower. 

The  share  of  the  Federal  Government  in  the  distribution  of  profits 
in  1918-19  is  quite  as  impossible  to  determine  for  this  grouj)  as  for 

the  37  companies. 

Exhibit  I. 

Tonnage  ofjlour — railroads  of  United  States} 


Year  ending  June  30. 


1910« 

i9n 

1912 

1913 

1914 

1915 

1916 

Dec.  31, 1916. 
Dec.  31, 1917. 


Originating 
on  road. 


Tons. 

8,038,684 

8,446,061 

8,451,197 

9,400,6a5 

9,568,383 

9,475,504 

10,364,918 

10,318,950 

10,065,219 


Received  from 
connecting 
roads  and 

other  carriers. 


Tom. 
11,691,167 
10,168,164 
10,598,139 
11,579,459 
11, 8%,  113 
12,185,017 
14,080,866 
14,101,475 
14,622,347 


Total. 


Tovs. 
19,729,851 
18,614,225 
19,W9.336 
20,980,064 
21,404,496 
21,660,521 
24,445,784 
24,420,425 
24,687,566 


*  Statement  compiled  ivom.  the  Annual  Reports  on  the  Statistics  of  Railways  in  the  United  States,  by 
the  Statistical  Division  of  the  Interstate  Commerce  Commission. 

2  Includes  returns  for  Classes  I,  II,  and  III  roads,  but  excludes  switching  and  terminal  companies. 
Returns  for  other  years  cover  Class  I  roads  only,  representing  originated  tonnage  in  excess  of  90  per  cent 
of  total. 


1-.'^ 


108 


commekcial  wheat-flour  milling. 
Exhibit  IL 


Estimated  percentages  of  soft  and  hard  winter,  soft  and  hard  common  spring,  and  durum 
wheat  grown  in  the  36  leading  wheat-producing  States  in  the  United  States.^ 

(Crop  0/1918.) 


State. 


New  York 

New  Jersey . . . . 
Pennsylvania.. 

Delaware 

Maryland 

Virginia 

West  Virginia . 
North  Carolina . 
South  Carolina. 

Georgia 

Ohio. 

Indiana 

Illinois 

Michigan 

Wisconsin , 

Minnesota 

Iowa 

Missouri , 

North  Dakota . . 
South  Dakota.. 

Nebraska 

Kansas 

Kentucky 

Tennessee 

Texas 

Oklahoma 

Arkansas 

Montana 

Wyoming 

Colorado 

Utah 

Nevada 

Idaho 

Washington 

Oregon 

CaUfomia 


Winter. 


Spring. 


Soft. 


Hard. 


89 

100 

99 

100 

100 

100 

100 

100 

100 

100 

94 

94 

76 

85 

12 

1 

6 

94 


Common. 


Soft. 


2 

15 

100 

100 

73 

16 

99 

3 


4 
44 

6 
30 
21 
57 
62 


5 

6 
22 

9 
10 

.3 
30 

6 


2 

80 
85 


25 
84 

1 
37 
25 
53 
14 
18 
22 

7 

22 

«25 


Hard. 


11 


Durum. 


12 


2 

6 

75 

92 

50 


C 


' 


3 
4 
2 


5 
10 

5 
38 
44 
34 
67 

5 
12 


71 

78 
13 


40 
37 
33 

2 
30 
12 

5 
16 

1 


29 
20 

3 


15 
28 
5 
3 
2 
2 


\ 


I  Furnished  by  the  Office  of  Cereal  Investigations,  Department  of  Agriculture.        » Hard  white. 

Exhibit  III. 

Progress  of  population,  wheat  crop,  and  flour  production  for  different  sections  indicated 
by  percentage  relations  to  totals  for  the  United  States. 


Vmted  States: 

Population 

Wheat  crop  i bushels '. '. 

Flour  prod  uction « barrels . . 

Wheat    consumption    by    mills, 

bushels 

Northwestern  Flour  Selling  Area; »' 

Population .percent.. 

Wheat  crop do 

Flour  production .".*.'.■  .'do .' .' .' .' 

Wheat    consumption    by    mills, 
percent 


74,798,612 

621,277,375 

99, 763, 777 

471,306,986 

3.0 
20.6 
23.9 

23.0 


82,601,384 
620,094,787 
104,013,278 

494,095,083 

3.2 
21.4 
24.4 

23.8 


90.691,354 
660, 6S9,  420 
105,756,645 

496,480,314 

3.3 
22.6 
23.6 

23.1 


COSTS,  PRICES,  AND  PROFITS. 


109 


Progress  of  population,  wheat  crop,  and  flour  production  for  different  sections  indicated 
by  percentage  relations  to  totals  for  the  United  States— Contimied. 


98,781,340 
794, 888, 000 
116,403,770 

545,728,431 

3.4 
22.7 
25.9 

25.4 


108,877,895 
&31,580,667 
121,156,373 

539,058,000 

3.5 
17.4 
26.8 

27.0 


J  Average  of  three  years'  crops  ending  with  given  vear 
>  Montana,  North  Dakota,  and  Minnesota. 


Southwestern  Flour  Selling  Area:  * 

Population per  cent . . 

Whea  t  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Pacific  Flour  Selling  Area: » 

Population per  cent . . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Eastern  Flour  Buying  Area: « 

Population per  cent. . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Southern  Flour  Buying  Area:  ^ 

Population per  cent. . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Central  Neutral  Area:  * 

Population per  cent . . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Southeastern  Neutral  Area: » 

Population per  cent . . 

Wlieat  crop do 

Flour  production do . . . 

Wheat    consumption    by    mills, 
per  cent 

California  (Western  Neutral  Area): 

Population per  cent . . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Colorado  (Western  Neutral  Area): 

Population per  cent . 

Wheat  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Eastern  Small  Production  Area: '« 

Population per  cent . . 

Whea  t  crop do 

Flour  production do 

Wheat    consumption    by    mills, 
per  cent 

Western  Small  Production  Area:  '• 

Population per  cent . . 

Wheat  crop do. . . 

Flour  production do. . . 

Wheat    consumption    by    mills, 
per  cent 


1899 


8.5 
18.0 
12.9 

13.0 

1.4 
7.2 
3.9 

4.0 

27.0 

6.6 

10.6 

10.5 

19.8 
3.2 
4.5 

4.6 

24.5 
30.0 
30.7 

31.3 

9.9 
7.5 

8.8 

9.0 

2.0 
4.4 
2.7 

2.7 

.7 

.9 

1.0 

1.0 

2.2 
.2 
.3 

.2 

1.0 

1.4 

.7 

.7 


1904 


8.5 
26.4 
16.8 

16.9 


1909 


1.8 
7.3 
4.9 

4.7 

27.4 

5.9 

10.2 

10.1 

19.8 
3.9 
4.9 

5.0 

23.8 
24.4 
28.2 

26.8 

9.4 
5.1 
&3 

8.4 

2.2 
3.3 

9  A 

2.4 

.8 

1.0 

.9 

.9 

2.0 
.3 
.3 

.3 

1.1 

1.0 

.7 

.7 


a5 

24.2 
19.9 

19.6 

2.3 
8.9 
4.3 

4.3 

27.8 

6.0 

10.8 

10.7 

19.7 
2.4 
4.6 

4.7 

23.0 

25.8 
24.9 

25.2 

8.9 
5.  G 
&4 

a7 

2.5 
1.9 
1.7 

1.8 

.9 

1.1 

.9 

.9 

1.9 
.3 
.2 

.8 

1.2 

1.2 

.7 

.7 


1914 


8.5 
30.8 
19.5 

19.5 

2.6 

10.3 

5.3 

5.3 

2&0 

4.3 

11.3 

11.2 

19.7 
3.0 
4.9 

4.9 

22.4 
20.2 
21.8 

22.0 

a6 

4.9 
7.8 

7.9 

2.8 

.7 

1.5 

1.8 

.9 
1.3 
1.1 

1.1 

1.8 
.3 
.2 

.2 

1.3 

1.5 

.7 

.7 


1919 


a6 

27.1 
22.0 

21.8 

X9 

7.9 
7.1 

7.2 

2&3 
5.0 

as 

lL7 

19.6 
4.S 
ILS 

4.8 

21.8 
27.8 
17.9 

l&O 

&2 
5.2 

6.7 

6.7 

3.0 
1.3 
2.6 

2.7 

1.0 
l.S 
1.2 

1.2 

1.7 
.3 
.2 

.1 

1.4 

1.9 

.8 


*  Nebraska.  Kansas,  Missouri,  and  Oklahoma. 
» Washington,  Oregon,  and  Idaho, 

« Massachusetts,  Rhode  Island,  Connecticut,  New  York,  New  Jersey,  Pennsylvania,  and  West  Virginia. 
''  North  Carolina,  South  Carolina,  Georgia,  Florida,  Alabama,  Mississippi,  Louisiana,  Arkansas,  and 
Texas. 

8  South  Dakota,  Iowa,  Wisconsin,  Illmois,  Michigan,  Indiana,  and  Ohio. 
»  Kentucky,  Tennessee,  Virginia,  Distnct  of  Columbia,  and  Maryland. 
10  Delaware,  New  Hampshire,  Maine,  and  Vermont. 
"  Utah,  Wyoming,  New  Mexico,  Arizona,  and  Nevada. 


r- 


■Tk 


M 


t         I 


^^^  COMMERCIAL  WHEAT-FLOUR  MILLING. 

Exhibit  IV. 
MILLERS'  ASSOaATIONS  AND  MILLERS'  CLUBS. 

Millers'  National  Federation, 
officers. 

President,  A.  L.  Goetzmann,  La  Crosse,  Wis. 

First  vice  president,  C.  M.  Hardenbergh,  Kansas  City,  Mo. 

becond  vice  president,  Henry  M.  Allen,  Troy,  Ohio 

Treasurer,  W.  L.  Phelps,  Chicago,  111 

Secretary,  A.  P.  Husband,  Chicago,  111.  (160  West  Jackson  Boulevard). 

EXECUTIVE   COMMITTEE. 

Officers  named  above  and  the  following- 

^;li"rH?'7'  ^"^f-  ^''""' ''"'"  ^°-  ^*-  ^""^^  ^°-  '^'-^^  <=<"nmittee  on  grain 
standardization  and  inspection.  ^ 

B  W.  Marr  chairman  committee  on  finance  and  membership. 
2Zlt  ''  ''^"'^°  'P'""'  ^'"^'^^''''  '^o'"'""***  »°  commercial  feeding 

"^^fp-^mp^emttf '^'^"  *"""-""  ""•  ^''"'-"'  «^-- «='>-nnan  committee  on 
C   B.  Jenkins,  chairman  committee  on  millers'  mutual  insurance. 
Thomas  L.  Moore,  chairman  committee  on  legislation 

Charles  T.  Olson,  Bay  State  Milling  Co.,  Winona,  Minn.,  chairman  committee  on 
package  differentials,  sales  contracts,  trade-marks,  publicity  ^«^«^^«ee  on 

tr^ade'''''''"'  ^'"^  ^'^'"  ^''"'°^^  ^"•'  ^''''°'  ^"^^  '^^^'"^^  ^«"^^i"ee  on  export 

''"n  a^bil^aZn"^'"'^  ""'''  ''''""'  ^'•'  ^""'  ^^^^'^'  ''''''"  '"^^'^^  ^--«ee 

James  C.  Andrews,  Yerxa,  Andrews  &  Thurston  (Inc.),  Minneapolis,  Minn    chair- 
man  committee  on  transportation.  *  ^mn.,  cnair- 


F.  H.  Price,  New  York,  N.  Y. 


EXPORT  AGENT. 


OFFICIAL  COUNSEL. 

Frank  F.  Reed  and  Edward  S.  Rogers,  Chicago,  111. 

BOARD   OF   DIRECTORS. 

Chauncy  Abbott,  jr.,  Omaha  Flour  Mills  Co.,  Omaha  Nebr 

C.  H.  Bell,  Quaker  City  Flour  Mills  Co.,  Philadelphia  Pa  * 

Henry  M.  Allen,  Allen  &  Wheeler  Co.,  Trov,  Ohio.      ' 

C.  R.  Anderson,  Red  River  Milling  Co.,  Fergus  Falls,  Minn. 

T.  S.  Blish,  Blish  Milling  Co.,  Seymour,  Ind. 

G.  A.  Breaux,  Ballard  &  Ballard  Co.,  Ix)uisville,  Ky 

Wm.  G.  Crocker,  Washburn-Crosby  Co.,  Minnea^lis,*  Minn 

n  ^.^.^'^^'^.^^  ^'^^'^"'  Aughenbaugh  &  Co.,  Waseca,  Minn. 

U.  D.  Fisher,  Pisher  Flouring  Mills  Co.,  Seattle,  Wash 

J.  L.  Gngg,  Eagle  Milling  Co.,  Sparta,  111. 

C  M.  Hardenbergh,  Southwestern  Milling  Co.,  Kansas  City,  Mo 

I '  tuT^\;  ^Z  Tf-lf "  ^^^""^"^  ^"^  ^«'  N^^  ^'^^'  ^linn. 
H.  S.  Helm,  Russell-Miller  Milling  Co.,  Minneapolis,  Minn 

J.  B.  Hupp,  Kansas  Flour  Mills  Co.,  Wichita,  Kans. 


I 


::*iw3>;;v 


-v^^ 


I 


COSTS,  PRICES,  AND  PROFITS. 

C.  B.  Jenkins,  Noblesville  Milling  Co.,  Noblesville,  Ind. 
E.  M.  Kelly,  Liberty  Mills,  Nashville,  Tenn. 

Joseph  Le  Compte,  Lexington  Roller  Mills,  Lexington,  Ky. 

A.  C.  Loring,  Pillsbury  Flour  Mills  Co.,  Minneapolis,  Minn. 

B.  W.  Marr,  Gwinn  Milling  Co.,  Columbus,  Ohio. 

S.  B.  McNear,  Sperry  Flour  Co.,  San  Francisco,  Calif. 

A.  Mennel,  Mennel  Milling  Co.,  Toledo,  Ohio. 
George  S.  Milnor,  Sparks  Milling  Co.,  Alton,  111. 
Thomas  L.  Moore,  Dunlop  Mills,  Richmond,  Va. 

W.  L.  Phelps,  Star  &  Crescent  Mlling  Co.,  Chicago,  111. 
E.  S.  Rea,  Rea-Patterson  Milling  Co.,  Coffeyville,  Kans. 
Charles  L.  Roos,  Hunter  Milling  Co.,  Wellington,  Kans. 

B.  B.  Sheffield,  Big  Diamond  Mills  Co.,  Minneapolis,  Minn. 
George  G.  Sohlberg,  Acme  Milling  Co.,  Oklahoma  City,  Okla- 
Walter  Stem,  Bernhard  Stem  &  Sons,  Milwaukee,  Wis. 

D.  E.  Stott,  David  Stott  Flour  Mills,  Detroit,  Mich. 

George  P.  Urban,  The  George  Urban  Milling  Co.,  Buffalo,  N.  Y. 

EX    OFFICIO    (eX-FRESIDENTS). 

B.  A.  Eckhart,  B.  A.  Eckhart  Milling  Co.,  Chicago,  111. 
Charles  Espenschied,  St.  Louis,  Mo. 

W.  E.  Castle,  St.  Ix)uis,  Mo. 

Dwight  M.  Baldwin,  Baldwin  Flour  Mills,  Minneapolis,  Minn. 

Hosea  B.  Sparks,  Sparks  Milling  Co.,  Alton,  111. 

Mark  N.  Mennel,  Mennel  Milling  Co.,  Toledo,  Ohio. 

•Samuel  Plant,  Geo.  P.  Plant  Milling  Co.,  St.  Louis,  Mo. 

Fred  J.  Longham,  Federal  Milling  Co.,  Lockport,  N.  Y. 

E.  M.  Kelly,  Liberty  Mills,  Nashville,  Tenn. 

Community  Millers'  Association  of  America. 

officers. 

President,  C.  W.  Bransford,  Owensboro,  Ky. 
Vice  president,  Geo.  W.  Ring,  Edinburg,  Va. 
Secretary  and  treasurer,  E.  H.  Sherwood,  230  South  Wells  Street,  Chicago,  IlL 

board,  of   GOVERNORS, 

C  W.  Bransford,  Owensboro,  Ky. 
J.  K.  Chapman,  Enid,  Okla. 
R.  D.  Collins,  Windom,  Minn. 
Pliny  Gratz,  Tecumseh,  Mich. 

C.  D.  McArthur,  Elgin,  III.     , 
S.  B.  Ray,  Gamaliel,  Ky. 
Geo.  W.  Ring,  Edinburg,  Va. 

S.  S.  Stevenson,  Arcanum,  Ohio. 
H.  G.  Young,  Zanesville,  Ohio. 

Association  of  Operative  Millers. 


Ill 


.■\ 


officers. 


president,  P.  H.  Lawson,  St.  Joseph,  Mo. 
Vice  president,  E.  M.  Friend,  Terrell,  Tex. 
Treasurer,  W.  C.  Dimn.  Independence,  Mo. 
Secretary,  Hugo  Roos,  Kansas  City,  Mo. 


112 


COMMERCIAL  WHEAT-FLOUR  MILLING. 

EXECUTIVE   COMMITTEB, 


Above-named  officers  and  the  follow-in'^: 
C.  H.  Barnard.  Wellington,  Kana. 
F.  J.  Becker,  Dickinson,  Tex. 
Louis  R.  Henkle,  Lawrenceburg,  Ind 

A.  W.  Spehr,  St.  Paul,  Minn. 

B.  C.  Williams,  Detroit,  Mich. 
Frank  0.  Witter,  Denver,  Colo. 

The  Millers'  Export  Assoctation  (Inc.). 
[Activities  discontinued.] 

OFFICERS. 

P^^dent,  W.  L.  Sparks,  Sparks  Milling  Co.,  Terre  Haute  Ind 

F.r.t  vice  premdent,  Chas.  L.  Roos,  Hun»*r  Milling  Co    WelHnMon   Kan, 

Second  vice  president  and  general  manaeer   R   P   n,    "Ellington,  Kans. 

ciation  (Inc.),  105  P«duc?  Exchan^e^Tew  Yofk  N  T"'  "  ^'^^^  ^^ 

Treasurer,  Frank  F.  Henry,  Washbum-Crosby  Co.,  Buffalo  N  Y 
Secretary  Chauncy  Abbot,  jr.,  Omaha  Flour  Mills  Co    Omaha  Nebr 
Ass^tant  Secretary,  Alex.  Pound,  Mi,W  Export  A^u^^anc-^New  York.  N.  Y. 

DIRECTORS. 

?,;L  R^*?'  ^T""*^^"*'  ^""^"^  •^-  Minneapolis,  Minn. 
Frank  B.  Rice,  Star  and  Crescent  Milling  Co    OUcaso   III 
C.  Powell  Smith,  J.  Allen  Smith  &  Co.,  Wille,  Sn 

Eastern  zone:  '°'"  bxecutive  ooMMnTEES. 

Fr?d  E  117'  "''"""''"'  ^^'^  ^'*""  **"'^S  ^<'-  Buffalo,  N.  Y. 

Fred  E.  Pond,  zone  manager,  Chamber  of  Commerce,  Buffalo  N  Y 

J.  G.  Davis,  J.  G.  Davis  Co..  Rochester,  N  Y 

W.B  Hamilton  WilUam  Hamilton  &  Son,  Caledonia.  N  Y 

F.  J.  Lmgham  Federal  Milling  Co.,  Lockport,  N.  Y. 

Southe™  zt^^"'  ^^^  ''^'^  "'■""«  ^°-'  «-<»".  M-- 

J.  ^^^  Morrison,  chairman  and  zone  manager,  Lexington  Roller  Mills.  Lexington. 

E.  M.  Kelly,  Liberty  Mills,  Nashville,  Tenn 

I.  C.  Klepper,  I^uisville  Milling  Co.,  I,ouis^•iIle,  Kv 

fw'  p^'^M 'j  ?i',"'°^  *^^'""8  Co.,  Clarksville,  Tenn. 

J- W.  Ring,  Model  Mills,  Johnson  City,  Tenn 
Central  zone: 

T.  S.  Blish.  chairman.  Blish  Millii^g  Co.,  Seymour,  Ind. 

L.  E.  Rice,  zone  manager,  Star  and  Crescent  Milling  Co    Chica«)  TIT 

Geo^  A  Amendt,  Amendt  Milling  Co..  Monroe.'Mich  ^'      * 

A.  y.  Imbs,  Imbs  Milling  Co.,  St.  Louis,  Mo. 

L.  A.  Mennel,  Mennel  Milling  Co.,  Toledo,  Ohio 

:^^^t^^'^.^tt-,r^:^fro^  Ohio,  and  West  Virginia 

bus,  Ohio.  manager  H.  G.  Spear,  Comstock  Building,  Colum- 

Northwestern  zone: 

J.  S.  Pillsbury,  chairman,  Pillsburv  Flour  Mi  Ha  Cr.    \jn  i-     ,,. 


COSTS,  PRICES,  AND  PROFITS. 


113 


(V 


kj. 


If 


i 


W.  L.  Harvey,  International  Milling  Co.,  New  Prague,  Minn. 

B.  B.  Sheffield,  Big  Diamond  Milling  Co.,  Minneapolis,  Minn. 

Southwestern  zone: 

J.  B.  Hupp,  chairman,  Kansas  Flour  Mills  Co.,  Wichita,  Kans. 

C.  V.  Topping,  zone  manager,  907  New  York  Life  Building,  Kansas  City,  Mo. 
W.  B.  Dunwoodv,  Brand-Dunwoody  Milling  Co.,  Joplin,  Mo. 

J.  C.  Mytinger,  Wichita  Mill  &  Elevator  Co.,  Wichita  Falls,  Tex. 

H.  G.  RandalL  Midland  Milling  Co.,  Kansas  City,  Mo. 

T.  C.  Thatcher,  Oklahoma  City  Mill  &  Elevator  Co.,  Oklahoma  City,  Okla. 

National  Federated  Flour  Clubs. 

officers. 

President,  Samuel  Knighton,  New  York,  N.  Y. 

Vice  president,  F.  W.  Blazy,  Cleveland,  Ohio. 

Secretary,  Fred  W.  Colquhoun,  Chicago,  111. 

Assistant  secretary  and  treasurer,  Walter  Quackenbush,  New  York,  N.  Y. 

Millers'  Exchange  (Kansas  City,  Mc). 

•  Attorney  in  fact  and  general  manager,  Charles  F.  Rock,  Kansas  City,  Mo. 

officers. 

Chairman,  G.  G.  Sohlberg,  Oklahoma  City,  Okla. 
Vice  chairman,  Aug.  J.  Butte,  Kansas  City,  Mo. 
Treasurer,  J.  B.  Hupp,  Wichita,  Kans. 
Secretary,  H.  Dittmer,  El  Reno,  Okla. 

ADVISORY  COMMITTEB. 

Above-named  officers  and  the  following: 
Chauncy  Abbott,  jr.,  Omaha,  Nebr. 
R.  Sam  Hays,  Sweet  Springs,  Mo. 
Theo.  Ismert,  Kansas  City,  Mo. 
S  P.  Kramer,  Topeka,  Kans. 
Geo.  S.  Milnor,  Alton,  111. 
John  H.  Moore,  Wichita,  Kans. 
Chas.  L.  Roos,  Wellington,  Kans. 

The  Southwestern  MIllers'  Leagub. 

officers. 

President,  L.  E.  Moses,  Kansas  City,  Mo. 

First  vice  president,  Frank  Kell,  Wichita  Falls,  Tex. 

Second  vice  president,  S.  P.  Kramer,  Topeka,  Kans. 

Treasurer,  H.  G.  Randall,  Kansas  City,  Mo. 

Secretary-traffic  manager,  C.  V.  Topping,  907-908  New  York  Life  Building,  Kansas 

City,  Mo. 
Chairman  of  traffic  committee,  H.  Dittmer,  El  Reno,  Okla. 
Commerce  counsel,  E.  H.  Hogueland. 
183256°— 20 8 


■=T=^ 


I^Mmmm 


^-,~   zir--^j>i^^ri..T. 


!  I 


114 


COMMERCIAL  WHEAT-FLOUE  MILLING. 


DIRECTORS. 


Ohauncy  Abbott,  jr.,  Omaha,  Nebr. 

^.  L.  AUer,  Crete,  Nebr. 

T.  P.  Duncan,  Waco,  Tex. 

J.  W.  Graver,  St.  Joseph,  Mo. 

S.  W.  Gladney,  Sherman,  Tex.  . 

J.  R.  Forsyth,  Denver,  Colo. 

F.  S.  Gresham,  Guthrie,  Okla. 

E.  R.  Lehman,  Geary,  Okla. 

J.  K.  Mullen,  Denver,  Colo. 

L.  S.  Meyer,  Springfield,  Mo. 

C.  L.  Roos,  Wellington,  Kans.  ** 

O.  W.  Wasmer,  Concordia,  Kana. 

Southeastern  Millers'  Assocutioh. 

OPPICER8. 

President,  E.  M.  Kelly,  Nashville,  Tenn 
FiiBt  vice  president,  T.  S.  Blish,  Seymour,  Ind 

SeTlrETlt  d''  '"r  ^^  ^ompte,'Lexington,  Ky 
iTeasurer,  i..  A.  Lmdsey,  Nashville,  Tenn  ^      '     ' 

Secretary,  J.  B.  McLemore,  Nashville,  Tenn. 

EXECUTIVE   COMMrrrEE. 

G.  A.  Breaux,  chairman,  Louisville,  Ky 

E.  P.  Bronson,  Chester,  111. 

W.  A.  Dale,  Columbia,  Tenn. 
C.  T.  Johnson,  Mount  Vernon,  Ind. 
R.  M.  McCombs,  Jackson,  Mo. 
C.  P.  Smith,  Knoxville,  Tenn. 
F.  A.  Witt,  Morristown,  Tenn. 

North  Pacific  Millers'  Association. 

officers. 
President,  O.  D.  Fisher,  Seattle,  Wash 
Vice  president,  E.  O.  McCoy,  The  Dalles  Oree 
Secretary,  W.  C.  Tiffany,  Seattle,  Wash    ^       ^' 

South  Pacific  Millers'  Association, 
officers. 
President  R.  D.  Joyce,  Los  Angeles,  Calif 
Vice  president,  Ellis  Hart,  Petaluma,  Calif 
Secretary  and  treasurer,  E.  C.  Mason,  San  Francisco,  Calif. 

DIRECTORS. 

R.  D.  Joyce,  H.  Levi,  Gay  Lombard  tat? 

,  vTdy  j^omoard,  G.  A.  Raymer,  Max  Viault. 

Illinois:  Southern  IlUnois  Millers'  Association     Qo.    . 
Sparta,  111.  Association.    Secretary  and  treasurer,  J.  L.  Grigg, 

Indiana:  Indiana  Millers'  Associitinn      q««.  * 
Indianapolis,  Ind.  ^^^^^^^«°-    Secretary  and  treasurer,  Charles  B.  Riley, 


'(    ■► 


■<f  I  " — 


4 


COSTS,  PRICES,  AND  PROFITS. 


115 


Kansas:  Southern  Kansas  Millers'  Club.     Secretary,  F.  D.  Stevens,  Wichita,  Kans. 
Kentucky:  Central  Kentucky  Millers'  Association.    Secretary  and  treasurer,  John  D. 

Allen,  Lexington,  Ky. 
Michigan:  Michigan  State  Millers'  Association.    Secretary,  F.  B.  Drees,  Lansing, 

Mich. 
Minnesota: 

Southern  Minnesota  Mills.     C.  E.  Vandenover,  Minneapolis,  Minn. 

Minnesota  Millers'  Club.    Secretary,  L.  H.  Pinney,  Minneapolis,  Minn. 
Missouri:  Southwestern   Missouri    Millers'    Association.     Secretary,    J.    S.    Flautt, 

Aurora,  Mo.  t.    t;,  •  u    i_ 

Montana:  Montana  Millers'  Association.    Secretary  and  treasurer,  S.  B.  Fairbank, 

Hobson,  Mont. 
Nebraska:  Nebraska  Millers'  Association.    Secretary,  J.  N.  Campbell,  Omaha,  Nebr. 
New  York:  New  York  State  Millers'  Association.    Secretary,  Fred  E.  Pond,  Buffalo, 

N.  Y. 
Ohio:  Ohio  Millers  State  Association.    Secretary  and  treasurer,  Frank  H.  Tanner, 

Columbus,  Ohio. 
Oklahoma:  Oklahoma  Millers'   Association.    Secretary  and  treasurer,  Gerome  Y. 

Topping,  Oklahoma  City,  Okla. 
Pennsylvania: 

Pennsylvania  Millers'  State  Association.    Secretary,  J.  F.  Isenberg,  HunUng- 

ton.  Pa. 
Pennsylvania  Millers'  Export  Association.    Secretary,  Thomas  K.  Sharpless, 

524  Bourse  Buildiug,  Philadelphia. 
South  Dakota:  South  Dakota  and  Southwestern  Minnesota  Millers'  Club.     Secretary 

and  treasurer,  Charles  A.  Lum,  Aberdeen,  S.  Dak. 
Utah,  Idaho:  Utah-Idaho  Millers'  and  Grain  Dealers'  As3  xaation.    Secretary,  H>Tum 

Bennion,  jr.,  Murray,  Utah. 

Tennessee:  Southeastern  Millers'  Association.  Secretary,  J.  B.  McLemore,  Nash- 
ville, Tenn. 

Virginia:  Virginia  Wheat  Millers'  Club.    Secretary,  M.  Kivlighan,  Staunton,  Va. 

Wisconsin:  Wisconsin  State  Millers'  Association.  Secretary  and  treasurer,  0.  H. 
Hooker,  Wausau,  Wis. 

Baltimore  Flour  Club.    Secretary,  R.  E.  McCosh. 

Boston  Flour  &  Grain  Club.    Secretary  and  treasiy-er,  Seth  Catlin,  jr. 

Buffalo  Flour  Club.    Secretary  and  treasurer,  F.  A.  Dirnberger. 

Chicago  Flour  Men's  Club.    Secretary  and  treasurer,  Fred  W.  Colquhoun. 

Cleveland  Flour  Club.    Secretary,  C.  W.  Fairchild. 

Kansas  City  Flour  &  Feed  Club.    Secretary,  Robert  E.  Sterling. 

Kansas  City  Millers'  Club.     Secretary,  Robert  E.  Sterling. 

Minneapolis:  The  Millers'  Club.    Secretary  and  treasurer,  Robert  T.  Beatty. 

New  York  Flour  Club  (Inc.).     Secretary,  Walter  Quackenbush. 

Philadelphia  Flour  Club.    Secretary,  William  J.  Rardon. 

St.  Louis,  Flour  Trade  Association  of.    Secretary  and  treasurer,  David  N.  Sosland. 

St.  LouisMillers'  Club.     Secretary  and  treasurer,  Frank  E.  Echler. 

San  Francisco  Flour  Trade.    Secretary  and  treasurer,  W.  F.  Williams. 


* 
i 


JA'^s-^in^^,' 


116 


COMMEROUL  WHEAT-FLOUR  MILLING. 

Exhibit  V. 


Proportion  of  hard  and  soft  wheat  used  by  ctrtain  mills  in  different  localities,  crop  year 

1916-17. 


I     i 


Location. 

Hard 
wheat. 

Soft 
wheat. 

Location. 

Hard 

wheat. 

Soft 
wheat. 

Minnesota  mills: 

1 

Perct. 
100 
100 
100 
100 
100 
100 
100 
100 
100 
98 
lOU 

Perct. 
2 

Mills  east  of  the  Mississippi  River: 

Per  ct. 
65 
67 
67 
30 

Perct. 
35 

2 

21 

83 

3 

3 

33 

4 

4 

70 

6» 

5 

100 

6 

6 

17 

15 

100 

70 

90 

100 

100 

100 

67 

88 

85 

30 

30 

15 

83 

7 

7 

85 

8 

8 

9 

9 

30 

10» 

10 

10 

Ill 

11» 

121 

13 

Avtttige  for  group 

«100 

14 

^ 

Kansas  and  Missouri  mills:  * 

100 
100 
33 
67 
100 
100 
100 
100 

98' 

100 
100 
94 
100 
75 
80 
30 
80 

67 

33 

ioo 

2 

6 

25 

20 
70 
20 

151 

12 

1 

161 

15 

2 

171 

70 

3 

4 

5 

6» 

18 

19 

20 

A  verace  for  ctouo 

70 

85 

100 

7 

49 

51 

8 

Washington  and  Oregon  mills: 

9 

10 

100 

Ill 

2 

25 
10 
79 
50 
25 
5 

76 

121 

3 

90 

13 

4. 

30 

14 

5 

50 

15 

6 

75 

16 

7 

05 

171 

Averaee  for  eroun 

181 

15 

85 

Average  for  group 

88 

12 

1  Crop  year  1917-18. 

<  Exact  avenge,  99.059.  Three  or  four  of  these  mills  reported  that  in  years  when  the  hard-wheat  supply 
was  short  and  of  poor  quality  they  liad  used  as  much  as  15  per  cent  of  soft  wbeat.  The  results  were 
unsatisfactory. 

« Including  one  Oklahoma  mill. 


!  I 


COSTS,  PRICES,  AND  PROFITS. 

Exhibit  VI. 

Quality  and  weight  of  wheat  by  States,  crop  years  1912-1918.^ 


117 


Quality  (per  cent  of  normal). 


1912 


United  States. 


<^>^. 


90 


'<;  "• 


< 


-  i 


Northwestern  Flour  Selling 
Area: 

Montana 

North  Dakota 

M  Innesota 

Southwestern  Flour  Selling 
Area: 

Nebraska 

Kansas 

Missouri 

Oklahoma 

Pacific  Flour  Selling  Area: 

Washington 

Oregon 

Idaho 

Eastern  Flour  Buying  Area: 

Massachusetts • 

Rhodelsland 

Connecticut ■ 

New  York 

New  Jersey 

Pennsylvania -. . .  - 

West  Virginia 

Southern     Flour     Buying 

A  |»nQ  • 

North  Carolina 

South  Carolina 

Georgia 

Florida 

Alabama. 

Mississippi 

Louisiana 

Arkansas -  • 

Texas 

Central  Neutral  Area: 

South  Dakota 

Iowa 

Wisconsin 

Illinois 

Michigan 

Indiana 

Ohio 

Southeastern  Neutral  Area: 

Kentucky 

Tennessee 

Virginia 

District  of  Coliunbia 

Maryland 

California 

Colorado 

Eastern  Neutral  Small  Pro- 
duction Area: 

Delaware 

New  Hampshire 

Maine 

Vermont 

Western  Neutral  Small  Pro- 
duction Area: 

Utah 

Wyoming 

New  Mexico *-... 

Arizona 

Nevada 


1913 


94 

89 
86 


96 
93 

88 
84 

92 
96 
94 


9C 
91 
92 
94 


84 
8C 

78 


93.2 


94 
93 
92 


93 

92 
96 

83 

94 
97 
94 


96 
93 
90 
91 


95 
92 
92 


1914 


1915 


84 
85 


87 


85 

88 

88 
93 

88 
79 

78 
77 
82 

82 
86 

88 


88 
89 
94 


92 


91 


91 
94 
92 
% 
94 
97 
95 

96 
96 
93 


89.7 


92 
77 
70 


92 
92 
94 
92 

96 
95 
91 


94 
85 
92 
95 


94 
90 
92 


88.4 


96 
91 
91 


87 
80 
78 
84 

95 
90 
95 


94 
93 
94 
96 


91 

89 
88 


1916 


92 
90 


87 
87 
92 


90 


78 

72 
90 
86 
95 
94 
95 
96 

97 
96 
94 


90 
92 


87.0 


90 
53 
61 


98 
95 
80 
96 

97 
97 
92 


92 
91 
93 
90 


88 
87 
89 


1917 


1918 


92.4 


82 
95 
94 


93 
92 
94 
93 

84 
83 
89 


93 
90 
94 
94 


93 
90 
89 


'¥ 


"  t 


90 

87 


97 
94 
92 
95 


97 
92 


95 
95 
90 
95 


95  97 


94 
92 
94 


96 


97 
92 


94 
92 
95 
95 

97 


86 
90 

89 
84 
94 
86 
91 
86 
90 

82 
84 
95 


80 

84 


92 
83 
91 


88 


97 
97 


94 
97 
93 
95 
93 


85 
93 

61 

89 
85 
86 
92 
89 
90 

90 
83 

86 


90 


93.1 


93 
96 
96 


88 
90 
94 
92 

88 
90 
93 


92 
94 
94 
95 


75 

88 
89 


W^eight  per  measured  bushel 
(pounds). 


1912 


1913 


1914 


58.3 


60 
58 
56 


60 
58 
58 
57 

59 
60 
60 


59 
60 
60 
60 


58 
58 
56 


1915 


87 
89 
92 


86 


95 
96 

94 
94 
93 
93 
90 
94 
95 

94 
94 
91 


88 
86 


97 
90 


92 
92 
93 
95 
95 


86 
94 
94 


89 


79 
90 


92 
91 
93 

88 
98 


89 
85 

96 
93 
95 
96 

87 
96 
95 

91 

86 
88 


58 
59 


94 

85 
92 


94       59 


58 
56 

59 
59 

58 
56 
57 
56 
56 

57 
58 
59 


58. 


60.1 
58.0 
57.0 


59.6 
58.1 
59.2 
57.0 

59.0 
60.1 
59.9 


59.5 
59.0 
59.7 
59.0 


59.5 
59.5 

58.8 


58.0 


59. 
54, 
53.1 


57.9 


60.5 
58.0 
58.0 


58.5 
58.3 


59.2 

58.0 
59.0 
59.7 

59.7 
59.4 
59.7 


59. 
59.0 
59.7 
59.9 


59.5 
59.5 

58.7 


1916  1917 


1918 


57.1  58.5 


59.1 
46.8 
49.7 


57.0  59.8 

56.0  58.0 

57.0  56.5 

56.0  58.7 


59.0 
59.2 


60 
59 
60 


96 
93 


95 
98 
91 
95 
92 


59 
60 


61 
60 
60 
60 
60 


58.5 
58.0 

58.0 
58.3 
58.9 
59.0 
58.8 
58.5 
59.0 

59.0 
59.0 
59.5 


59.3 
58.9 
59.  S 


59.6 
59.5 
59.9 
60.2 


59.1 
59. 

58. 


58.2 
58.6 
58.0 


58.8 
57.9 

58.8 
58.5 


59.8 
60.6 
59.7 


58.5 
59.1 
59.5 
59.6 


59.0 
59.5 
58.6 


58.8 


59.2 
50.6 
58.2 


57.9 
58.0 
59.0 

58.8 


57.1  57.1 
58.3  58.9 
58.  5!  59. 3 


58.7 
58.6 


58.0 
56.0 

52.9 
57.9 
56.9 
58.7 
59.5 
59.3 
59.3 

59.4 
59.0 
59.1 


59.5 

58.0 
59.4 


58.5 


60. 
59. 
59.1 


60.0 


60.5 
59.0 


61.6 
60.2 
59.5 
61.9 
60.3 


60.0 
59.0 


60.6 
59.9 
59.5 
63.2 
59.8 


57.0 
57.6 

57.6 
57.4 
59.9 
57.5 
58.5 
57.4 
58. 

57.5 
58.0 
60.4 


5S.2 
56.5 


59.  o 
59.1 
59.5 
59.9 


59.8 
59.4 
58.6 


58.3 
58.2 


5X5 

57.5 
58.9 


59.0 


61.0 
59.5 


61.0 
60.4 
58.6 
59.0 
60.4 


57.8 
58.2 

47.9 

57.3 

57 

57.0 

58.4 

57.1 

58.5 

58.0 
57.0 
59.5 


59.6 
59.5 
60.0 
59.9 


57.0 
59.2 
58.5 


58.2 
.57.0 


58.1 
59.01 

58.3 
58.0 
59.1 
57.8 
58.9 
58.3 
59.0 

58.7 
58.4 
59.0 


57.0 
58.0 

58.  S 
58.1 
59.0 
59.1 
59.4 
58.9 

58.6 
58.0 
59.0 


59.0 

59.  o; 

59.3 


59.11  60.0 
59.2  58. 2 
59.5   5S.0 


58.0  59.0  eao 


58.5,  58.71  6a0 
58.5  58.0!  50.0 


I 


60.9 
59.6 
59.5 
58.5 
59.4 


59.7 
60.1 
59.6 
58.5 
60.0 


60.5 
60.0 
58.7 
60.0 
59.7 


I  Data  furnished  by  the  Department  of  Agriculture. 


I  I 


t^lsa  "irr^ii, 


^^.;1<^    -    :-~    I  V?.,.-    -A.    "■■,     -.  ■'    ■   ■>vw.-i.    ,vj   j,'.-»-  T-,~--.-    ,i»-  .T.,».-^ 


i   I 


118 


COMMERCIAL  WHEAT-FLOUR  MILLING. 

Exhibit  VII. 


Analyses  of  the  cost  of  making  and  selling  a  barrel  of  wheat  flour,  by  groups  and  by  years, 

1913-14  to  1917-18. 


SOUTHWESTERN  GROUP. 


Wheat 

Packages 

Mill  operating  costs 

General  and  selling  expense. 


Total  cost  of  flour  and  feed . 
Charged  to  production  of  feed 

Net  cost  of  flour  per  barrel «. 


Mill  operating  costs 


labor,  power  and  miscellaneous  operating 

costs 

Repairs 

Depreciation  * 


Total 

Total  operating,  general  and  selling  costs «. 


$3.90 
.26 
.26 
.25 


4.67 
.83 


3.84 


.20 
.02 
.04 


,26 


t4.90 
.22 
.25 
.25 


5.62 
.83 


4.79 


.19 
.02 
.04 


.25 


.51 


.50 


$4.97 

-.22 

.25 

.24 

5.68 
.82 


4.86 


$7.56 
.28 
.28 
.31 


8.43 
1.15 


7.28 


.19 
.02 
.04 


.21 
.03 
.04 


.25 


,28 


.49 


NORTHWESTERN  GROUP. 

Items  of  cost. 

1913-14 

1914-15 

1915-16 

1916-17 

1917-18 

Wheat                       

$3.90 
.27 
.20 
.30 

$5.52 
.23 
.21 
.34 

$4.99 
.25 
.20 
.31 

$8.55 
.32 
.26 
.44 

$9.61 

poptflorpC                                    ••••. 

46 

Xf ill  finpratin^  ^0*%!^                   •••-• 

.37 

General  and  selling  expense 

.42 

T*nf ftl  /»AQt  nf  flniir  ftnd  fppd    ..    ••••• 

4.67 
.71 

6.30 
.82 

5.75 
.74 

9.57 
1.28 

10.86 

Charged  to  production  of  feed 

1.25 

Net  cost  of  flour  per  barreH 

3.98 

5.48 

5.01 

8.29 

9.61 

Mm  operating  costs: 

Mill  labor,  power,  and  miscellaneous  operating 

costs              ............••• 

.15 
.02 
.03 

.15 
.03 
.03 

.15 
.02 
.03 

.20 
.03 
.03 

.28 

Rpnftirs .........•...••••••••••••••••• 

.06 

Depreciation* 

.03 

Total 

.20 

.21 

.20 

.26 

.37 

Total  operating,  general  and  selling  costs » 

.50 

.55 

.51 

.70 

.79 

$9.77 
.48 
.36 
.36 


10.97 
1.37 

9.60 


.27 
.05 

.04 


.36 


.72 


EASTERN  GROUP. 

IXThPftt                             -. ••- 

$4.28 
.29 
.27 
.34 

$5.50 
.25 
.25 
.32 

$5.63 
.25 
.25 
.35 

$8.16 
.32 
.34 
.44 

$10.15 

Paplrapp^ -.••• 

.47 

Mill  onpratin?  co*^ts           

.37 

General  and  selUng  expense 

,41 

Total  po<;t  of  flour  and  feed 

5.18 
.93 

6.32 
.94 

6.48 
.90 

9.26 
1.29 

11.40 

Charged  to  production  of  feed 

1.39 

Net  cost  of  flour  per  barrel  i 

4.25 

5.38 

5.58 

7.97 

10.01 

Mill  operating  costs: 

Mill  labor,  power  and  miscellaneous  operatmg 

/Vkcf-c                             

.21 
.02 
.04 

.19 
.02 
.04 

.19 
.02 
.04 

.27 
.03 
.04 

.28 

Renairs       

.05 

Depreciation « 

.04 

Total A 

.27 

.25 

.25 

.34 

.37 

Total  operating,  general  and  selling  costs ' 

• 

.61 

.57 

.60 

.78 

.78 

I  Based  on  barrels  of  flour  produced. 

«  Actual  figures,  Northwestern  group,  $0.0284;  Southwestern  group,  $0.0361;  Eastern  group,  $0.0420. 

«  These  costs  do  not  include  interest  charges  amounting  to  2  cents  in  1914,  3  cents  m  1915, 2  cents  m  1916, 
4 cents  in  1917,  and  3  cents  in  1918.  .,,„,.„       *   ,    tmc  o^^^oi^ioia 

*  These  costs  do  not  include  interest  charges  amounting  to  3  cents  in  1914,  2  cents  in  1915,  2  cents  m  1916, 
4  cents  in  1917,  and  4  cents  in  1918. 

» These  costs  do  not  include  interest  charges  amounting  to  4  cents  in  1914,  4  cents  in  1915, 3  cents  in  1916, 
7  cents  in  1917,  and  5  cents  in  1918. 


<  ^  1^1 


r  i^ 


k 


Date  Due 


Air«   060U 


FEB  1 4  )m 


0041401816 


( 


3lO 


Ixn. 


M0V1     191;     /    _^,  ^  ..-/ 


^  A^lTI  ff1939 


^ 1 


.^/ 


t 


1 

■m 


\ 


END  OF 
TITLE 


